Correlation Between Fubon SP and Fubon Dow

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

Diversification Opportunities for Fubon SP and Fubon Dow

0.48

Correlation Coefficient

Fubon SP  Fubon Dow

Very weak diversification

The 3 months correlation between Fubon and Fubon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fubon SP Preferred and Fubon Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Dow Jones 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 Fubon Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Dow Jones has no effect on the direction of Fubon SP i.e., Fubon SP and Fubon Dow go up and down completely randomly.

Pair Corralation between Fubon SP and Fubon Dow

Assuming the 90 days trading horizon Fubon SP Preferred is expected to generate 0.5 times more return on investment than Fubon Dow. However, Fubon SP Preferred is 1.98 times less risky than Fubon Dow. It trades about 0.0 of its potential returns per unit of risk. Fubon Dow Jones is currently generating about -0.02 per unit of risk. If you would invest  1,630  in Fubon SP Preferred on September 16, 2024 and sell it today you would lose (4.00) from holding Fubon SP Preferred or give up 0.25% of portfolio value over 90 days.

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

Fubon SP Preferred  vs.  Fubon Dow Jones

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.

Fubon Dow Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon Dow is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fubon SP and Fubon Dow

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

The idea behind Fubon SP Preferred and Fubon Dow Jones 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.