Correlation Between Khgears International and Fubon Financial

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

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

Diversification Opportunities for Khgears International and Fubon Financial

0.25

Correlation Coefficient

Khgears International  Fubon Financial

Modest diversification

The 3 months correlation between Khgears and Fubon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Khgears International Limited and Fubon Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Financial Holding and Khgears International 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 Khgears International Limited are associated (or correlated) with Fubon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Financial Holding has no effect on the direction of Khgears International i.e., Khgears International and Fubon Financial go up and down completely randomly.

Pair Corralation between Khgears International and Fubon Financial

Assuming the 90 days trading horizon Khgears International Limited is expected to generate 11.8 times more return on investment than Fubon Financial. However, Khgears International is 11.8 times more volatile than Fubon Financial Holding. It trades about 0.16 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.02 per unit of risk. If you would invest  11,900  in Khgears International Limited on September 22, 2024 and sell it today you would earn a total of  13,300  from holding Khgears International Limited or generate 111.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Khgears International Limited  vs.  Fubon Financial Holding

Khgears International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Khgears International Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Khgears International showed solid returns over the last few months and may actually be approaching a breakup point.

Fubon Financial Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 12 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Khgears International and Fubon Financial

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

The idea behind Khgears International Limited and Fubon Financial Holding 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .