Correlation Between Fubon Financial and Arcadyan Technology

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

Diversification Opportunities for Fubon Financial and Arcadyan Technology

0.92

Correlation Coefficient

Fubon Financial  Arcadyan Technology

Almost no diversification

The 3 months correlation between Fubon and Arcadyan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Arcadyan Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadyan Technology Corp 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 Arcadyan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadyan Technology Corp has no effect on the direction of Fubon Financial i.e., Fubon Financial and Arcadyan Technology go up and down completely randomly.

Pair Corralation between Fubon Financial and Arcadyan Technology

Assuming the 90 days trading horizon Fubon Financial is expected to generate 15.04 times less return on investment than Arcadyan Technology. But when comparing it to its historical volatility, Fubon Financial Holding is 22.32 times less risky than Arcadyan Technology. It trades about 0.28 of its potential returns per unit of risk. Arcadyan Technology Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  13,850  in Arcadyan Technology Corp on September 4, 2024 and sell it today you would earn a total of  3,550  from holding Arcadyan Technology Corp or generate 25.63% return on investment over 90 days.

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

Fubon Financial Holding  vs.  Arcadyan Technology Corp

Fubon Financial Holding

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 21 (%) 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.

Arcadyan Technology Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadyan Technology Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arcadyan Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon Financial and Arcadyan Technology

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

The idea behind Fubon Financial Holding and Arcadyan Technology Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.