Correlation Between Fubon SP and Paradigm

Can any of the company-specific risk be diversified away by investing in both Fubon SP and Paradigm 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 Paradigm 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 Paradigm SP GSCI, you can compare the effects of market volatilities on Fubon SP and Paradigm 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 Paradigm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon SP and Paradigm.

Diversification Opportunities for Fubon SP and Paradigm

0.38

Correlation Coefficient

Fubon SP  Paradigm

Weak diversification

The 3 months correlation between Fubon and Paradigm is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fubon SP Preferred and Paradigm SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm SP GSCI 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 Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm SP GSCI has no effect on the direction of Fubon SP i.e., Fubon SP and Paradigm go up and down completely randomly.

Pair Corralation between Fubon SP and Paradigm

Assuming the 90 days trading horizon Fubon SP Preferred is expected to under-perform the Paradigm. But the etf apears to be less risky and, when comparing its historical volatility, Fubon SP Preferred is 5.17 times less risky than Paradigm. The etf trades about -0.15 of its potential returns per unit of risk. The Paradigm SP GSCI is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,246  in Paradigm SP GSCI on September 18, 2024 and sell it today you would earn a total of  93.00  from holding Paradigm SP GSCI or generate 7.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fubon SP Preferred  vs.  Paradigm SP GSCI

Fubon SP Preferred

Risk-Adjusted Performance

0 of 100

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.

Paradigm SP GSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm SP GSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Paradigm may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fubon SP and Paradigm

The main advantage of trading using opposite Fubon SP and Paradigm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon SP position performs unexpectedly, Paradigm 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 Paradigm will offset losses from the drop in Paradigm's long position.

The idea behind Fubon SP Preferred and Paradigm SP GSCI 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.