Correlation Between Fubon Dow and Fuh Hwa
Can any of the company-specific risk be diversified away by investing in both Fubon Dow and Fuh Hwa 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 Dow and Fuh Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon Dow Jones and Fuh Hwa FTSE, you can compare the effects of market volatilities on Fubon Dow and Fuh Hwa 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 Dow with a short position of Fuh Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Dow and Fuh Hwa.
Diversification Opportunities for Fubon Dow and Fuh Hwa
Very weak diversification
The 3 months correlation between Fubon and Fuh is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Dow Jones and Fuh Hwa FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa FTSE and Fubon Dow 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 Dow Jones are associated (or correlated) with Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa FTSE has no effect on the direction of Fubon Dow i.e., Fubon Dow and Fuh Hwa go up and down completely randomly.
Pair Corralation between Fubon Dow and Fuh Hwa
Assuming the 90 days trading horizon Fubon Dow Jones is expected to generate 1.04 times more return on investment than Fuh Hwa. However, Fubon Dow is 1.04 times more volatile than Fuh Hwa FTSE. It trades about 0.06 of its potential returns per unit of risk. Fuh Hwa FTSE is currently generating about 0.06 per unit of risk. If you would invest 1,664 in Fubon Dow Jones on September 3, 2024 and sell it today you would earn a total of 520.00 from holding Fubon Dow Jones or generate 31.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Fubon Dow Jones vs. Fuh Hwa FTSE
Performance |
| Timeline |
| Fubon Dow Jones |
| Fuh Hwa FTSE |
Fubon Dow and Fuh Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Dow and Fuh Hwa
The main advantage of trading using opposite Fubon Dow and Fuh Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Dow position performs unexpectedly, Fuh Hwa 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 Fuh Hwa will offset losses from the drop in Fuh Hwa's long position.| Fubon Dow vs. Fubon Hang Seng | Fubon Dow vs. Fubon SP Preferred | Fubon Dow vs. Fubon NASDAQ 100 1X | Fubon Dow 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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