Correlation Between Fubon Financial and China Life

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

Diversification Opportunities for Fubon Financial and China Life

0.0

Correlation Coefficient

Fubon Financial  China Life

Pay attention - limited upside

The 3 months correlation between Fubon and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Fubon Financial i.e., Fubon Financial and China Life go up and down completely randomly.

Pair Corralation between Fubon Financial and China Life

If you would invest  152.00  in China Life Insurance on September 20, 2024 and sell it today you would earn a total of  34.00  from holding China Life Insurance or generate 22.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Fubon Financial Holding  vs.  China Life Insurance

Fubon Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fubon Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking indicators, China Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon Financial and China Life

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

The idea behind Fubon Financial Holding and China Life Insurance 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.