Correlation Between Fubon Hang and Fubon SP
Can any of the company-specific risk be diversified away by investing in both Fubon Hang and Fubon SP 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 Hang and Fubon SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon Hang Seng and Fubon SP Preferred, you can compare the effects of market volatilities on Fubon Hang and Fubon SP 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 Hang with a short position of Fubon SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Hang and Fubon SP.
Diversification Opportunities for Fubon Hang and Fubon SP
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fubon and Fubon is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Hang Seng and Fubon SP Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon SP Preferred and Fubon Hang 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 Hang Seng are associated (or correlated) with Fubon SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon SP Preferred has no effect on the direction of Fubon Hang i.e., Fubon Hang and Fubon SP go up and down completely randomly.
Pair Corralation between Fubon Hang and Fubon SP
Assuming the 90 days trading horizon Fubon Hang Seng is expected to generate 2.23 times more return on investment than Fubon SP. However, Fubon Hang is 2.23 times more volatile than Fubon SP Preferred. It trades about 0.24 of its potential returns per unit of risk. Fubon SP Preferred is currently generating about 0.05 per unit of risk. If you would invest 1,204 in Fubon Hang Seng on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Fubon Hang Seng or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Hang Seng vs. Fubon SP Preferred
Performance |
| Timeline |
| Fubon Hang Seng |
| Fubon SP Preferred |
Fubon Hang and Fubon SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Hang and Fubon SP
The main advantage of trading using opposite Fubon Hang and Fubon SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Hang position performs unexpectedly, Fubon SP 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 SP will offset losses from the drop in Fubon SP's long position.The idea behind Fubon Hang Seng and Fubon SP Preferred 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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