Correlation Between Fubon Financial and Chinese Maritime

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

Diversification Opportunities for Fubon Financial and Chinese Maritime

0.02

Correlation Coefficient

Fubon Financial  Chinese Maritime

Significant diversification

The 3 months correlation between Fubon and Chinese is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Chinese Maritime Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Maritime Tra 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 Chinese Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Maritime Tra has no effect on the direction of Fubon Financial i.e., Fubon Financial and Chinese Maritime go up and down completely randomly.

Pair Corralation between Fubon Financial and Chinese Maritime

Assuming the 90 days trading horizon Fubon Financial is expected to generate 1.84 times less return on investment than Chinese Maritime. But when comparing it to its historical volatility, Fubon Financial Holding is 17.27 times less risky than Chinese Maritime. It trades about 0.35 of its potential returns per unit of risk. Chinese Maritime Transport is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,125  in Chinese Maritime Transport on September 12, 2024 and sell it today you would earn a total of  125.00  from holding Chinese Maritime Transport or generate 3.03% return on investment over 90 days.

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

Fubon Financial Holding  vs.  Chinese Maritime Transport

Fubon Financial Holding

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 27 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Chinese Maritime Tra

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chinese Maritime Transport are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chinese Maritime 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 Chinese Maritime

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

The idea behind Fubon Financial Holding and Chinese Maritime Transport 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.