Correlation Between ECloudvalley Digital and Fubon Taiwan

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

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

Diversification Opportunities for ECloudvalley Digital and Fubon Taiwan

0.74

Correlation Coefficient

ECloudvalley Digital  Fubon Taiwan

Poor diversification

The 3 months correlation between ECloudvalley and Fubon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding eCloudvalley Digital Technolog 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 ECloudvalley Digital 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 eCloudvalley Digital Technology 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 ECloudvalley Digital i.e., ECloudvalley Digital and Fubon Taiwan go up and down completely randomly.

Pair Corralation between ECloudvalley Digital and Fubon Taiwan

Assuming the 90 days trading horizon eCloudvalley Digital Technology is expected to under-perform the Fubon Taiwan. In addition to that, ECloudvalley Digital is 2.1 times more volatile than Fubon Taiwan Technology. It trades about -0.07 of its total potential returns per unit of risk. Fubon Taiwan Technology is currently generating about -0.1 per unit of volatility. If you would invest  19,550  in Fubon Taiwan Technology on December 25, 2024 and sell it today you would lose (1,525) from holding Fubon Taiwan Technology or give up 7.8% of portfolio value over 90 days.

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

eCloudvalley Digital Technolog  vs.  Fubon Taiwan Technology

eCloudvalley Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days eCloudvalley Digital Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Fubon Taiwan Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fubon Taiwan Technology 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.

Pair Trading with ECloudvalley Digital and Fubon Taiwan

The main advantage of trading using opposite ECloudvalley Digital and Fubon Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECloudvalley Digital 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 eCloudvalley Digital Technology 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.

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.