Correlation Between President Chain and Fubon Financial

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

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

Diversification Opportunities for President Chain and Fubon Financial

0.01

Correlation Coefficient

President Chain  Fubon Financial

Significant diversification

The 3 months correlation between President and Fubon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store 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 President Chain 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 President Chain Store 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 President Chain i.e., President Chain and Fubon Financial go up and down completely randomly.

Pair Corralation between President Chain and Fubon Financial

Assuming the 90 days trading horizon President Chain Store is expected to under-perform the Fubon Financial. But the stock apears to be less risky and, when comparing its historical volatility, President Chain Store is 1.7 times less risky than Fubon Financial. The stock trades about -0.02 of its potential returns per unit of risk. The Fubon Financial Holding is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  9,100  in Fubon Financial Holding on September 16, 2024 and sell it today you would earn a total of  260.00  from holding Fubon Financial Holding or generate 2.86% return on investment over 90 days.

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

President Chain Store  vs.  Fubon Financial Holding

President Chain Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Chain Store has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture 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 President Chain and Fubon Financial

The main advantage of trading using opposite President Chain and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if President Chain 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 President Chain Store 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..