Correlation Between Fubon Financial and Greatek Electronics

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

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

Diversification Opportunities for Fubon Financial and Greatek Electronics

-0.38

Correlation Coefficient

Fubon Financial  Greatek Electronics

Very good diversification

The 3 months correlation between Fubon and Greatek is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek Electronics and Fubon Financial 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 Financial Holding are associated (or correlated) with Greatek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatek Electronics has no effect on the direction of Fubon Financial i.e., Fubon Financial and Greatek Electronics go up and down completely randomly.

Pair Corralation between Fubon Financial and Greatek Electronics

Assuming the 90 days trading horizon Fubon Financial is expected to generate 1.62 times less return on investment than Greatek Electronics. But when comparing it to its historical volatility, Fubon Financial Holding is 10.77 times less risky than Greatek Electronics. It trades about 0.38 of its potential returns per unit of risk. Greatek Electronics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,700  in Greatek Electronics on September 5, 2024 and sell it today you would earn a total of  80.00  from holding Greatek Electronics or generate 1.4% return on investment over 90 days.

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

Fubon Financial Holding  vs.  Greatek Electronics

Fubon Financial Holding

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 24 (%) 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.

Greatek Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Greatek Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Greatek Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fubon Financial and Greatek Electronics

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

The idea behind Fubon Financial Holding and Greatek Electronics 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.