Correlation Between Fubon FTSE and Yuanta STOXX

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

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

Diversification Opportunities for Fubon FTSE and Yuanta STOXX

-0.57

Correlation Coefficient

Fubon FTSE  Yuanta STOXX

Excellent diversification

The 3 months correlation between Fubon and Yuanta is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fubon FTSE Vietnam and Yuanta STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta STOXX Global and Fubon FTSE 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 FTSE Vietnam are associated (or correlated) with Yuanta STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta STOXX Global has no effect on the direction of Fubon FTSE i.e., Fubon FTSE and Yuanta STOXX go up and down completely randomly.

Pair Corralation between Fubon FTSE and Yuanta STOXX

Assuming the 90 days trading horizon Fubon FTSE Vietnam is expected to generate 0.28 times more return on investment than Yuanta STOXX. However, Fubon FTSE Vietnam is 3.58 times less risky than Yuanta STOXX. It trades about -0.12 of its potential returns per unit of risk. Yuanta STOXX Global is currently generating about -0.12 per unit of risk. If you would invest  1,180  in Fubon FTSE Vietnam on October 7, 2024 and sell it today you would lose (12.00) from holding Fubon FTSE Vietnam or give up 1.02% of portfolio value over 90 days.

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

Fubon FTSE Vietnam  vs.  Yuanta STOXX Global

Fubon FTSE Vietnam

Risk-Adjusted Performance

0 of 100

Very Weak

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

Yuanta STOXX Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta STOXX Global are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Yuanta STOXX may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fubon FTSE and Yuanta STOXX

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

The idea behind Fubon FTSE Vietnam and Yuanta STOXX Global 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.