Correlation Between Fubon SP and Fuh Hwa

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Can any of the company-specific risk be diversified away by investing in both Fubon SP and Fuh Hwa at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fubon SP and Fuh Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon SP Preferred and Fuh Hwa Emerging, you can compare the effects of market volatilities on Fubon SP and Fuh Hwa and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fubon SP with a short position of Fuh Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon SP and Fuh Hwa.

Diversification Opportunities for Fubon SP and Fuh Hwa

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Fubon and Fuh is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fubon SP Preferred and Fuh Hwa Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa Emerging and Fubon SP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fubon SP Preferred are associated (or correlated) with Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa Emerging has no effect on the direction of Fubon SP i.e., Fubon SP and Fuh Hwa go up and down completely randomly.

Pair Corralation between Fubon SP and Fuh Hwa

Assuming the 90 days trading horizon Fubon SP Preferred is expected to generate 1.11 times more return on investment than Fuh Hwa. However, Fubon SP is 1.11 times more volatile than Fuh Hwa Emerging. It trades about -0.04 of its potential returns per unit of risk. Fuh Hwa Emerging is currently generating about -0.13 per unit of risk. If you would invest  1,642  in Fubon SP Preferred on September 18, 2024 and sell it today you would lose (22.00) from holding Fubon SP Preferred or give up 1.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Fubon SP Preferred  vs.  Fuh Hwa Emerging

 Performance 
       Timeline  
Fubon SP Preferred 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fubon SP Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon SP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Fuh Hwa Emerging 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fuh Hwa Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fuh Hwa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fubon SP and Fuh Hwa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fubon SP and Fuh Hwa

The main advantage of trading using opposite Fubon SP and Fuh Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon SP position performs unexpectedly, Fuh Hwa can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fuh Hwa will offset losses from the drop in Fuh Hwa's long position.
The idea behind Fubon SP Preferred and Fuh Hwa Emerging pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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