Correlation Between Pacific Hospital and Fubon Financial

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

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

Diversification Opportunities for Pacific Hospital and Fubon Financial

0.76

Correlation Coefficient

Pacific Hospital  Fubon Financial

Poor diversification

The 3 months correlation between Pacific and Fubon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Hospital Supply 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 Pacific Hospital 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 Pacific Hospital Supply 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 Pacific Hospital i.e., Pacific Hospital and Fubon Financial go up and down completely randomly.

Pair Corralation between Pacific Hospital and Fubon Financial

Assuming the 90 days trading horizon Pacific Hospital Supply is expected to generate 7.25 times more return on investment than Fubon Financial. However, Pacific Hospital is 7.25 times more volatile than Fubon Financial Holding. It trades about 0.26 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.25 per unit of risk. If you would invest  9,180  in Pacific Hospital Supply on October 10, 2024 and sell it today you would earn a total of  470.00  from holding Pacific Hospital Supply or generate 5.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Pacific Hospital Supply  vs.  Fubon Financial Holding

Pacific Hospital Supply

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Hospital Supply are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pacific Hospital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fubon Financial Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fubon Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pacific Hospital and Fubon Financial

The main advantage of trading using opposite Pacific Hospital and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Hospital 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 Pacific Hospital Supply 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.