Correlation Between Fubon TWSE and Fubon Dow

Can any of the company-specific risk be diversified away by investing in both Fubon TWSE and Fubon Dow 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 Dow 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 Dow Jones, you can compare the effects of market volatilities on Fubon TWSE and Fubon Dow 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 Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon TWSE and Fubon Dow.

Diversification Opportunities for Fubon TWSE and Fubon Dow

-0.11

Correlation Coefficient

Fubon TWSE  Fubon Dow

Good diversification

The 3 months correlation between Fubon and Fubon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fubon TWSE Corporate and Fubon Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Dow Jones 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Dow Jones has no effect on the direction of Fubon TWSE i.e., Fubon TWSE and Fubon Dow go up and down completely randomly.

Pair Corralation between Fubon TWSE and Fubon Dow

Assuming the 90 days trading horizon Fubon TWSE Corporate is expected to generate 1.0 times more return on investment than Fubon Dow. However, Fubon TWSE Corporate is 1.0 times less risky than Fubon Dow. It trades about 0.11 of its potential returns per unit of risk. Fubon Dow Jones is currently generating about 0.01 per unit of risk. If you would invest  4,170  in Fubon TWSE Corporate on September 12, 2024 and sell it today you would earn a total of  305.00  from holding Fubon TWSE Corporate or generate 7.31% return on investment over 90 days.

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

Fubon TWSE Corporate  vs.  Fubon Dow Jones

Fubon TWSE Corporate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon TWSE Corporate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fubon TWSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fubon Dow Jones

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Fubon Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon Dow is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fubon TWSE and Fubon Dow

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

The idea behind Fubon TWSE Corporate and Fubon Dow Jones 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.