Correlation Between Paradigm and Fubon Dow

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

By analyzing existing cross correlation between Paradigm SP GSCI and Fubon Dow Jones, you can compare the effects of market volatilities on Paradigm 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 Paradigm with a short position of Fubon Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paradigm and Fubon Dow.

Diversification Opportunities for Paradigm and Fubon Dow

0.39

Correlation Coefficient

Paradigm  Fubon Dow

Weak diversification

The 3 months correlation between Paradigm and Fubon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm SP GSCI 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 Paradigm 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 Paradigm SP GSCI 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 Paradigm i.e., Paradigm and Fubon Dow go up and down completely randomly.

Pair Corralation between Paradigm and Fubon Dow

Assuming the 90 days trading horizon Paradigm SP GSCI is expected to under-perform the Fubon Dow. In addition to that, Paradigm is 3.51 times more volatile than Fubon Dow Jones. It trades about -0.03 of its total potential returns per unit of risk. Fubon Dow Jones is currently generating about -0.07 per unit of volatility. If you would invest  2,298  in Fubon Dow Jones on September 3, 2024 and sell it today you would lose (114.00) from holding Fubon Dow Jones or give up 4.96% of portfolio value over 90 days.

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

Paradigm SP GSCI  vs.  Fubon Dow Jones

Paradigm SP GSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paradigm SP GSCI 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.

Fubon Dow Jones

Risk-Adjusted Performance

0 of 100

Very 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 Paradigm and Fubon Dow

The main advantage of trading using opposite Paradigm and Fubon Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paradigm 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 Paradigm SP GSCI 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..