Correlation Between Fubon Financial and Sinopac Financial

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

Diversification Opportunities for Fubon Financial and Sinopac Financial

0.23

Correlation Coefficient

Fubon Financial  Sinopac Financial

Modest diversification

The 3 months correlation between Fubon and Sinopac is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Sinopac Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopac Financial 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 Sinopac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopac Financial has no effect on the direction of Fubon Financial i.e., Fubon Financial and Sinopac Financial go up and down completely randomly.

Pair Corralation between Fubon Financial and Sinopac Financial

Assuming the 90 days trading horizon Fubon Financial Holding is expected to generate 0.9 times more return on investment than Sinopac Financial. However, Fubon Financial Holding is 1.11 times less risky than Sinopac Financial. It trades about 0.05 of its potential returns per unit of risk. Sinopac Financial Holdings is currently generating about -0.03 per unit of risk. If you would invest  9,040  in Fubon Financial Holding on October 21, 2024 and sell it today you would earn a total of  60.00  from holding Fubon Financial Holding or generate 0.66% return on investment over 90 days.

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

Fubon Financial Holding  vs.  Sinopac Financial Holdings

Fubon Financial Holding

Risk-Adjusted Performance

0 of 100

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.

Sinopac Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fubon Financial and Sinopac Financial

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

The idea behind Fubon Financial Holding and Sinopac Financial Holdings 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.