Correlation Between Fuh Hwa and YuantaP Shares
Can any of the company-specific risk be diversified away by investing in both Fuh Hwa and YuantaP Shares 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 Fuh Hwa and YuantaP Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fuh Hwa Emerging and YuantaP shares Taiwan Electronics, you can compare the effects of market volatilities on Fuh Hwa and YuantaP Shares 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 Fuh Hwa with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuh Hwa and YuantaP Shares.
Diversification Opportunities for Fuh Hwa and YuantaP Shares
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fuh and YuantaP is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fuh Hwa Emerging and YuantaP shares Taiwan Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares Taiwan and Fuh Hwa 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 Fuh Hwa Emerging are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares Taiwan has no effect on the direction of Fuh Hwa i.e., Fuh Hwa and YuantaP Shares go up and down completely randomly.
Pair Corralation between Fuh Hwa and YuantaP Shares
Assuming the 90 days trading horizon Fuh Hwa is expected to generate 29.76 times less return on investment than YuantaP Shares. But when comparing it to its historical volatility, Fuh Hwa Emerging is 3.04 times less risky than YuantaP Shares. It trades about 0.01 of its potential returns per unit of risk. YuantaP shares Taiwan Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,935 in YuantaP shares Taiwan Electronics on August 29, 2024 and sell it today you would earn a total of 4,090 from holding YuantaP shares Taiwan Electronics or generate 68.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fuh Hwa Emerging vs. YuantaP shares Taiwan Electron
Performance |
| Timeline |
| Fuh Hwa Emerging |
| YuantaP shares Taiwan |
Fuh Hwa and YuantaP Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fuh Hwa and YuantaP Shares
The main advantage of trading using opposite Fuh Hwa and YuantaP Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuh Hwa position performs unexpectedly, YuantaP Shares 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 YuantaP Shares will offset losses from the drop in YuantaP Shares' long position.The idea behind Fuh Hwa Emerging and YuantaP shares Taiwan Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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