Correlation Between Fubon Financial and Inventec Corp

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

Diversification Opportunities for Fubon Financial and Inventec Corp

0.85

Correlation Coefficient

Fubon Financial  Inventec Corp

Very poor diversification

The 3 months correlation between Fubon and Inventec is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Inventec Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventec Corp 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 Inventec Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventec Corp has no effect on the direction of Fubon Financial i.e., Fubon Financial and Inventec Corp go up and down completely randomly.

Pair Corralation between Fubon Financial and Inventec Corp

Assuming the 90 days trading horizon Fubon Financial is expected to generate 14.81 times less return on investment than Inventec Corp. But when comparing it to its historical volatility, Fubon Financial Holding is 32.89 times less risky than Inventec Corp. It trades about 0.31 of its potential returns per unit of risk. Inventec Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,595  in Inventec Corp on September 4, 2024 and sell it today you would earn a total of  405.00  from holding Inventec Corp or generate 8.81% return on investment over 90 days.

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

Fubon Financial Holding  vs.  Inventec Corp

Fubon Financial Holding

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fubon Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Inventec Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inventec Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Inventec Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon Financial and Inventec Corp

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

The idea behind Fubon Financial Holding and Inventec Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.