Correlation Between First Financial and Yuanta Financial

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

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

Diversification Opportunities for First Financial and Yuanta Financial

0.37

Correlation Coefficient

First Financial  Yuanta Financial

Weak diversification

The 3 months correlation between First and Yuanta is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Holding and Yuanta Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Financial Holdings and First 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 First Financial Holding are associated (or correlated) with Yuanta Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Financial Holdings has no effect on the direction of First Financial i.e., First Financial and Yuanta Financial go up and down completely randomly.

Pair Corralation between First Financial and Yuanta Financial

Assuming the 90 days trading horizon First Financial Holding is expected to under-perform the Yuanta Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Holding is 1.57 times less risky than Yuanta Financial. The stock trades about -0.06 of its potential returns per unit of risk. The Yuanta Financial Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Yuanta Financial Holdings on December 5, 2024 and sell it today you would earn a total of  125.00  from holding Yuanta Financial Holdings or generate 3.57% return on investment over 90 days.

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

First Financial Holding  vs.  Yuanta Financial Holdings

First Financial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, First Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yuanta Financial Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Financial Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yuanta Financial 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 First Financial and Yuanta Financial

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

The idea behind First Financial Holding and Yuanta Financial Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.