Correlation Between Solar Applied and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both Solar Applied and Fubon Financial 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 Solar Applied and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solar Applied Materials and Fubon Financial Holding, you can compare the effects of market volatilities on Solar Applied and Fubon Financial 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 Solar Applied with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Applied and Fubon Financial.
Diversification Opportunities for Solar Applied and Fubon Financial
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Solar and Fubon is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Solar Applied Materials and Fubon Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Financial Holding and Solar Applied 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 Solar Applied Materials are associated (or correlated) with Fubon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Financial Holding has no effect on the direction of Solar Applied i.e., Solar Applied and Fubon Financial go up and down completely randomly.
Pair Corralation between Solar Applied and Fubon Financial
Assuming the 90 days trading horizon Solar Applied Materials is expected to generate 8.04 times more return on investment than Fubon Financial. However, Solar Applied is 8.04 times more volatile than Fubon Financial Holding. It trades about 0.06 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.01 per unit of risk. If you would invest 3,545 in Solar Applied Materials on November 2, 2024 and sell it today you would earn a total of 2,525 from holding Solar Applied Materials or generate 71.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solar Applied Materials vs. Fubon Financial Holding
Performance |
| Timeline |
| Solar Applied Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Fubon Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Solar Applied and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solar Applied and Fubon Financial
The main advantage of trading using opposite Solar Applied and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Applied position performs unexpectedly, Fubon Financial 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 Financial will offset losses from the drop in Fubon Financial's long position.The idea behind Solar Applied Materials and Fubon Financial Holding 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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