Correlation Between Fubon Financial and Ruentex Development

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

Diversification Opportunities for Fubon Financial and Ruentex Development

0.46

Correlation Coefficient

Fubon Financial  Ruentex Development

Very weak diversification

The 3 months correlation between Fubon and Ruentex is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Ruentex Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Development 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 Ruentex Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Development has no effect on the direction of Fubon Financial i.e., Fubon Financial and Ruentex Development go up and down completely randomly.

Pair Corralation between Fubon Financial and Ruentex Development

Assuming the 90 days trading horizon Fubon Financial Holding is expected to generate 0.92 times more return on investment than Ruentex Development. However, Fubon Financial Holding is 1.08 times less risky than Ruentex Development. It trades about 0.06 of its potential returns per unit of risk. Ruentex Development Co is currently generating about -0.02 per unit of risk. If you would invest  8,619  in Fubon Financial Holding on September 4, 2024 and sell it today you would earn a total of  341.00  from holding Fubon Financial Holding or generate 3.96% 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.  Ruentex Development Co

Fubon Financial Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ruentex Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ruentex Development 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 Ruentex Development

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

The idea behind Fubon Financial Holding and Ruentex Development Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.