Correlation Between Wha Yu and Fubon Taiwan

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Can any of the company-specific risk be diversified away by investing in both Wha Yu 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 Wha Yu and Fubon Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wha Yu Industrial and Fubon Taiwan Technology, you can compare the effects of market volatilities on Wha Yu 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 Wha Yu with a short position of Fubon Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wha Yu and Fubon Taiwan.

Diversification Opportunities for Wha Yu and Fubon Taiwan

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Wha and Fubon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Wha Yu 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 Wha Yu 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 Wha Yu 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 Wha Yu i.e., Wha Yu and Fubon Taiwan go up and down completely randomly.

Pair Corralation between Wha Yu and Fubon Taiwan

Assuming the 90 days trading horizon Wha Yu Industrial is expected to generate 1.98 times more return on investment than Fubon Taiwan. However, Wha Yu is 1.98 times more volatile than Fubon Taiwan Technology. It trades about 0.08 of its potential returns per unit of risk. Fubon Taiwan Technology is currently generating about 0.12 per unit of risk. If you would invest  1,730  in Wha Yu Industrial on October 8, 2024 and sell it today you would earn a total of  180.00  from holding Wha Yu Industrial or generate 10.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wha Yu Industrial  vs.  Fubon Taiwan Technology

 Performance 
       Timeline  
Wha Yu Industrial 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Wha Yu Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wha Yu may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Fubon Taiwan Technology 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Taiwan Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Fubon Taiwan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wha Yu and Fubon Taiwan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wha Yu and Fubon Taiwan

The main advantage of trading using opposite Wha Yu and Fubon Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wha Yu 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 Wha Yu 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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