Correlation Between Fubon TWSE and Fubon FTSE
Can any of the company-specific risk be diversified away by investing in both Fubon TWSE and Fubon FTSE 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 TWSE and Fubon FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon TWSE Corporate and Fubon FTSE TWSE, you can compare the effects of market volatilities on Fubon TWSE and Fubon FTSE 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 TWSE with a short position of Fubon FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon TWSE and Fubon FTSE.
Diversification Opportunities for Fubon TWSE and Fubon FTSE
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fubon and Fubon is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Fubon TWSE Corporate and Fubon FTSE TWSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon FTSE TWSE and Fubon TWSE 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 TWSE Corporate are associated (or correlated) with Fubon FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon FTSE TWSE has no effect on the direction of Fubon TWSE i.e., Fubon TWSE and Fubon FTSE go up and down completely randomly.
Pair Corralation between Fubon TWSE and Fubon FTSE
Assuming the 90 days trading horizon Fubon TWSE is expected to generate 1.25 times less return on investment than Fubon FTSE. But when comparing it to its historical volatility, Fubon TWSE Corporate is 1.05 times less risky than Fubon FTSE. It trades about 0.1 of its potential returns per unit of risk. Fubon FTSE TWSE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 7,285 in Fubon FTSE TWSE on September 4, 2024 and sell it today you would earn a total of 3,830 from holding Fubon FTSE TWSE or generate 52.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon TWSE Corporate vs. Fubon FTSE TWSE
Performance |
| Timeline |
| Fubon TWSE Corporate |
| Fubon FTSE TWSE |
Fubon TWSE and Fubon FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon TWSE and Fubon FTSE
The main advantage of trading using opposite Fubon TWSE and Fubon FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon TWSE position performs unexpectedly, Fubon FTSE 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 FTSE will offset losses from the drop in Fubon FTSE's long position.| Fubon TWSE vs. Cathay Taiwan 5G | Fubon TWSE vs. Ruentex Development Co | Fubon TWSE vs. Symtek Automation Asia | Fubon TWSE vs. CTCI Corp |
| Fubon FTSE vs. Fubon Hang Seng | Fubon FTSE vs. Fubon SP Preferred | Fubon FTSE vs. Fubon NASDAQ 100 1X | Fubon FTSE vs. Fubon TWSE Corporate |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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