Correlation Between Fubon Financial and Mercuries Life

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

By analyzing existing cross correlation between Fubon Financial Holding and Mercuries Life Insurance, you can compare the effects of market volatilities on Fubon Financial and Mercuries Life 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 Financial with a short position of Mercuries Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and Mercuries Life.

Diversification Opportunities for Fubon Financial and Mercuries Life

0.5

Correlation Coefficient

Fubon Financial  Mercuries Life

Very weak diversification

The 3 months correlation between Fubon and Mercuries is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Mercuries Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Life Insurance and Fubon Financial 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 Financial Holding are associated (or correlated) with Mercuries Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Life Insurance has no effect on the direction of Fubon Financial i.e., Fubon Financial and Mercuries Life go up and down completely randomly.

Pair Corralation between Fubon Financial and Mercuries Life

Assuming the 90 days trading horizon Fubon Financial Holding is expected to under-perform the Mercuries Life. But the stock apears to be less risky and, when comparing its historical volatility, Fubon Financial Holding is 1.29 times less risky than Mercuries Life. The stock trades about -0.03 of its potential returns per unit of risk. The Mercuries Life Insurance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  638.00  in Mercuries Life Insurance on December 25, 2024 and sell it today you would earn a total of  24.00  from holding Mercuries Life Insurance or generate 3.76% return on investment over 90 days.

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

Fubon Financial Holding  vs.  Mercuries Life Insurance

Fubon Financial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fubon Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fubon Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mercuries Life Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mercuries Life Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mercuries Life is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fubon Financial and Mercuries Life

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

The idea behind Fubon Financial Holding and Mercuries Life Insurance 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.