Correlation Between Chialin Precision and Fubon Taiwan

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

By analyzing existing cross correlation between Chialin Precision Industrial and Fubon Taiwan Technology, you can compare the effects of market volatilities on Chialin Precision and Fubon Taiwan 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 Chialin Precision with a short position of Fubon Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chialin Precision and Fubon Taiwan.

Diversification Opportunities for Chialin Precision and Fubon Taiwan

0.5

Correlation Coefficient

Chialin Precision  Fubon Taiwan

Very weak diversification

The 3 months correlation between Chialin and Fubon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Chialin Precision Industrial and Fubon Taiwan Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Taiwan Technology and Chialin Precision 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 Chialin Precision Industrial are associated (or correlated) with Fubon Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Taiwan Technology has no effect on the direction of Chialin Precision i.e., Chialin Precision and Fubon Taiwan go up and down completely randomly.

Pair Corralation between Chialin Precision and Fubon Taiwan

Assuming the 90 days trading horizon Chialin Precision Industrial is expected to generate 0.41 times more return on investment than Fubon Taiwan. However, Chialin Precision Industrial is 2.44 times less risky than Fubon Taiwan. It trades about 0.65 of its potential returns per unit of risk. Fubon Taiwan Technology is currently generating about 0.14 per unit of risk. If you would invest  9,000  in Chialin Precision Industrial on October 11, 2024 and sell it today you would earn a total of  640.00  from holding Chialin Precision Industrial or generate 7.11% return on investment over 90 days.

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

Chialin Precision Industrial  vs.  Fubon Taiwan Technology

Chialin Precision

Risk-Adjusted Performance

14 of 100

Good

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

Fubon Taiwan Technology

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Taiwan Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fubon Taiwan 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 Chialin Precision and Fubon Taiwan

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

The idea behind Chialin Precision Industrial and Fubon Taiwan Technology 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.