Correlation Between Fubon Dow and Fubon FTSE

Can any of the company-specific risk be diversified away by investing in both Fubon Dow and Fubon FTSE 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 Dow and Fubon FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fubon Dow Jones and Fubon FTSE TWSE, you can compare the effects of market volatilities on Fubon Dow and Fubon FTSE 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 Dow with a short position of Fubon FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Dow and Fubon FTSE.

Diversification Opportunities for Fubon Dow and Fubon FTSE

-0.25

Correlation Coefficient

Fubon Dow  Fubon FTSE

Very good diversification

The 3 months correlation between Fubon and Fubon is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Dow Jones and Fubon FTSE TWSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon FTSE TWSE and Fubon Dow 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 Dow Jones are associated (or correlated) with Fubon FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon FTSE TWSE has no effect on the direction of Fubon Dow i.e., Fubon Dow and Fubon FTSE go up and down completely randomly.

Pair Corralation between Fubon Dow and Fubon FTSE

Assuming the 90 days trading horizon Fubon Dow is expected to generate 2.18 times less return on investment than Fubon FTSE. But when comparing it to its historical volatility, Fubon Dow Jones is 1.25 times less risky than Fubon FTSE. It trades about 0.06 of its potential returns per unit of risk. Fubon FTSE TWSE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,280  in Fubon FTSE TWSE on September 26, 2024 and sell it today you would earn a total of  5,175  from holding Fubon FTSE TWSE or generate 82.4% return on investment over 90 days.

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

Fubon Dow Jones  vs.  Fubon FTSE TWSE

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Fubon FTSE TWSE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon FTSE TWSE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fubon FTSE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fubon Dow and Fubon FTSE

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

The idea behind Fubon Dow Jones and Fubon FTSE TWSE 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.