Correlation Between TUL and Fubon Financial

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

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

Diversification Opportunities for TUL and Fubon Financial

0.23

Correlation Coefficient

TUL  Fubon Financial

Modest diversification

The 3 months correlation between TUL and Fubon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding TUL Corp. 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 TUL 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 TUL Corporation 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 TUL i.e., TUL and Fubon Financial go up and down completely randomly.

Pair Corralation between TUL and Fubon Financial

Assuming the 90 days trading horizon TUL Corporation is expected to under-perform the Fubon Financial. In addition to that, TUL is 1.85 times more volatile than Fubon Financial Holding. It trades about -0.02 of its total potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.11 per unit of volatility. If you would invest  6,450  in Fubon Financial Holding on September 13, 2024 and sell it today you would earn a total of  2,710  from holding Fubon Financial Holding or generate 42.02% return on investment over 90 days.

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

TUL Corp.  vs.  Fubon Financial Holding

TUL Corporation

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TUL Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TUL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fubon Financial Holding

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Financial Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fubon Financial 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 TUL and Fubon Financial

The main advantage of trading using opposite TUL and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TUL 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 TUL Corporation 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.