Correlation Between Champion Building and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both Champion Building 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 Champion Building and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Building Materials and Fubon Financial Holding, you can compare the effects of market volatilities on Champion Building 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 Champion Building with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Building and Fubon Financial.
Diversification Opportunities for Champion Building and Fubon Financial
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Champion and Fubon is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Champion Building 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 Champion Building 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 Champion Building 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 Champion Building i.e., Champion Building and Fubon Financial go up and down completely randomly.
Pair Corralation between Champion Building and Fubon Financial
Assuming the 90 days trading horizon Champion Building Materials is expected to generate 13.21 times more return on investment than Fubon Financial. However, Champion Building is 13.21 times more volatile than Fubon Financial Holding. It trades about 0.27 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.52 per unit of risk. If you would invest 931.00 in Champion Building Materials on November 27, 2024 and sell it today you would earn a total of 53.00 from holding Champion Building Materials or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Champion Building Materials vs. Fubon Financial Holding
Performance |
| Timeline |
| Champion Building |
| Fubon Financial Holding |
Champion Building and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champion Building and Fubon Financial
The main advantage of trading using opposite Champion Building and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Building 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.| Champion Building vs. China Glaze Co | Champion Building vs. Chung Hwa Pulp | Champion Building vs. Taiwan Glass Ind | Champion Building vs. China Man Made Fiber |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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