Correlation Between Fubon Financial and Froch Enterprise

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

Diversification Opportunities for Fubon Financial and Froch Enterprise

0.72

Correlation Coefficient

Fubon Financial  Froch Enterprise

Poor diversification

The 3 months correlation between Fubon and Froch is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Froch Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Froch Enterprise 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 Froch Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Froch Enterprise has no effect on the direction of Fubon Financial i.e., Fubon Financial and Froch Enterprise go up and down completely randomly.

Pair Corralation between Fubon Financial and Froch Enterprise

Assuming the 90 days trading horizon Fubon Financial is expected to generate 1.84 times less return on investment than Froch Enterprise. But when comparing it to its historical volatility, Fubon Financial Holding is 13.25 times less risky than Froch Enterprise. It trades about 0.45 of its potential returns per unit of risk. Froch Enterprise Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,655  in Froch Enterprise Co on December 30, 2024 and sell it today you would earn a total of  85.00  from holding Froch Enterprise Co or generate 5.14% 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.  Froch Enterprise Co

Fubon Financial Holding

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 35 (%) 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.

Froch Enterprise

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Froch Enterprise Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Froch Enterprise may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fubon Financial and Froch Enterprise

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

The idea behind Fubon Financial Holding and Froch Enterprise 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.