Correlation Between Fubon TWSE and Fubon NASDAQ

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

By analyzing existing cross correlation between Fubon TWSE Corporate and Fubon NASDAQ 100 1X, you can compare the effects of market volatilities on Fubon TWSE and Fubon NASDAQ 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 Fubon TWSE with a short position of Fubon NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon TWSE and Fubon NASDAQ.

Diversification Opportunities for Fubon TWSE and Fubon NASDAQ

-0.77

Correlation Coefficient

Fubon TWSE  Fubon NASDAQ

Pay attention - limited upside

The 3 months correlation between Fubon and Fubon is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fubon TWSE Corporate and Fubon NASDAQ 100 1X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon NASDAQ 100 and Fubon TWSE 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 Fubon TWSE Corporate are associated (or correlated) with Fubon NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon NASDAQ 100 has no effect on the direction of Fubon TWSE i.e., Fubon TWSE and Fubon NASDAQ go up and down completely randomly.

Pair Corralation between Fubon TWSE and Fubon NASDAQ

Assuming the 90 days trading horizon Fubon TWSE Corporate is expected to generate 1.15 times more return on investment than Fubon NASDAQ. However, Fubon TWSE is 1.15 times more volatile than Fubon NASDAQ 100 1X. It trades about 0.03 of its potential returns per unit of risk. Fubon NASDAQ 100 1X is currently generating about -0.1 per unit of risk. If you would invest  4,240  in Fubon TWSE Corporate on September 2, 2024 and sell it today you would earn a total of  84.00  from holding Fubon TWSE Corporate or generate 1.98% return on investment over 90 days.

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

Fubon TWSE Corporate  vs.  Fubon NASDAQ 100 1X

Fubon TWSE Corporate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon TWSE Corporate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fubon TWSE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Fubon NASDAQ 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon NASDAQ 100 1X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Fubon TWSE and Fubon NASDAQ

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

The idea behind Fubon TWSE Corporate and Fubon NASDAQ 100 1X 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.