Correlation Between IBF Financial and Fubon Financial

Can any of the company-specific risk be diversified away by investing in both IBF Financial and Fubon Financial 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 IBF Financial and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IBF Financial Holdings and Fubon Financial Holding, you can compare the effects of market volatilities on IBF Financial and Fubon Financial 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 IBF Financial with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBF Financial and Fubon Financial.

Diversification Opportunities for IBF Financial and Fubon Financial

0.1

Correlation Coefficient

IBF Financial  Fubon Financial

Average diversification

The 3 months correlation between IBF and Fubon is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and Fubon Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Financial Holding and IBF 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 IBF Financial Holdings are associated (or correlated) with Fubon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Financial Holding has no effect on the direction of IBF Financial i.e., IBF Financial and Fubon Financial go up and down completely randomly.

Pair Corralation between IBF Financial and Fubon Financial

Assuming the 90 days trading horizon IBF Financial is expected to generate 3.33 times less return on investment than Fubon Financial. But when comparing it to its historical volatility, IBF Financial Holdings is 1.16 times less risky than Fubon Financial. It trades about 0.04 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,710  in Fubon Financial Holding on September 18, 2024 and sell it today you would earn a total of  660.00  from holding Fubon Financial Holding or generate 7.58% return on investment over 90 days.

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

IBF Financial Holdings  vs.  Fubon Financial Holding

IBF Financial Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IBF Financial Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IBF Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fubon Financial Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fubon Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IBF Financial and Fubon Financial

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

The idea behind IBF Financial Holdings and Fubon Financial Holding 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.