Correlation Between Fubon Taiwan and Zero One
Can any of the company-specific risk be diversified away by investing in both Fubon Taiwan and Zero One 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 Taiwan and Zero One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon Taiwan Technology and Zero One Technology, you can compare the effects of market volatilities on Fubon Taiwan and Zero One 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 Taiwan with a short position of Zero One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Taiwan and Zero One.
Diversification Opportunities for Fubon Taiwan and Zero One
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fubon and Zero is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Taiwan Technology and Zero One Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zero One Technology and Fubon Taiwan 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 Taiwan Technology are associated (or correlated) with Zero One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zero One Technology has no effect on the direction of Fubon Taiwan i.e., Fubon Taiwan and Zero One go up and down completely randomly.
Pair Corralation between Fubon Taiwan and Zero One
Assuming the 90 days trading horizon Fubon Taiwan Technology is expected to generate 0.57 times more return on investment than Zero One. However, Fubon Taiwan Technology is 1.75 times less risky than Zero One. It trades about 0.2 of its potential returns per unit of risk. Zero One Technology is currently generating about -0.06 per unit of risk. If you would invest 19,400 in Fubon Taiwan Technology on November 4, 2024 and sell it today you would earn a total of 840.00 from holding Fubon Taiwan Technology or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Taiwan Technology vs. Zero One Technology
Performance |
| Timeline |
| Fubon Taiwan Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Zero One Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Fubon Taiwan and Zero One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Taiwan and Zero One
The main advantage of trading using opposite Fubon Taiwan and Zero One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Taiwan position performs unexpectedly, Zero One 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 Zero One will offset losses from the drop in Zero One's long position.The idea behind Fubon Taiwan Technology and Zero One Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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