Correlation Between Fubon Financial and Lemtech Holdings

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

Diversification Opportunities for Fubon Financial and Lemtech Holdings

0.79

Correlation Coefficient

Fubon Financial  Lemtech Holdings

Poor diversification

The 3 months correlation between Fubon and Lemtech is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Lemtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemtech Holdings 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 Lemtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemtech Holdings has no effect on the direction of Fubon Financial i.e., Fubon Financial and Lemtech Holdings go up and down completely randomly.

Pair Corralation between Fubon Financial and Lemtech Holdings

Assuming the 90 days trading horizon Fubon Financial is expected to generate 12.71 times less return on investment than Lemtech Holdings. But when comparing it to its historical volatility, Fubon Financial Holding is 24.29 times less risky than Lemtech Holdings. It trades about 0.35 of its potential returns per unit of risk. Lemtech Holdings Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,300  in Lemtech Holdings Co on September 13, 2024 and sell it today you would earn a total of  2,900  from holding Lemtech Holdings Co or generate 28.16% return on investment over 90 days.

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

Fubon Financial Holding  vs.  Lemtech Holdings Co

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.

Lemtech Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon Financial and Lemtech Holdings

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

The idea behind Fubon Financial Holding and Lemtech Holdings 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.