Correlation Between Sunmax Biotechnology and Fubon Financial

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

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

Diversification Opportunities for Sunmax Biotechnology and Fubon Financial

0.77

Correlation Coefficient

Sunmax Biotechnology  Fubon Financial

Poor diversification

The 3 months correlation between Sunmax and Fubon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sunmax Biotechnology Co 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 Sunmax Biotechnology 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 Sunmax Biotechnology Co 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 Sunmax Biotechnology i.e., Sunmax Biotechnology and Fubon Financial go up and down completely randomly.

Pair Corralation between Sunmax Biotechnology and Fubon Financial

Assuming the 90 days trading horizon Sunmax Biotechnology Co is expected to generate 16.83 times more return on investment than Fubon Financial. However, Sunmax Biotechnology is 16.83 times more volatile than Fubon Financial Holding. It trades about 0.27 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.51 per unit of risk. If you would invest  27,900  in Sunmax Biotechnology Co on December 24, 2024 and sell it today you would earn a total of  9,400  from holding Sunmax Biotechnology Co or generate 33.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Sunmax Biotechnology Co  vs.  Fubon Financial Holding

Sunmax Biotechnology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunmax Biotechnology Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunmax Biotechnology showed solid returns over the last few months and may actually be approaching a breakup point.

Fubon Financial Holding

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 40 (%) 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 Sunmax Biotechnology and Fubon Financial

The main advantage of trading using opposite Sunmax Biotechnology and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunmax Biotechnology 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 Sunmax Biotechnology Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.