Correlation Between Chung Hung and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both Chung Hung 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 Chung Hung and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hung Steel and Fubon Financial Holding, you can compare the effects of market volatilities on Chung Hung 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 Chung Hung with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hung and Fubon Financial.
Diversification Opportunities for Chung Hung and Fubon Financial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chung and Fubon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hung Steel 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 Chung Hung 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 Chung Hung Steel 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 Chung Hung i.e., Chung Hung and Fubon Financial go up and down completely randomly.
Pair Corralation between Chung Hung and Fubon Financial
Assuming the 90 days trading horizon Chung Hung Steel is expected to generate 2.08 times more return on investment than Fubon Financial. However, Chung Hung is 2.08 times more volatile than Fubon Financial Holding. It trades about -0.01 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about -0.1 per unit of risk. If you would invest 2,065 in Chung Hung Steel on August 25, 2024 and sell it today you would lose (15.00) from holding Chung Hung Steel or give up 0.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Chung Hung Steel vs. Fubon Financial Holding
Performance |
| Timeline |
| Chung Hung Steel |
| Fubon Financial Holding |
Chung Hung and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hung and Fubon Financial
The main advantage of trading using opposite Chung Hung and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hung 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.| Chung Hung vs. Cheng Shin Rubber | Chung Hung vs. Taiwan Cement Corp | Chung Hung vs. China Steel Chemical | Chung Hung vs. Yulon Motor Co |
| Fubon Financial vs. Tai Tung Communication | Fubon Financial vs. Tang Eng Iron | Fubon Financial vs. Cameo Communications | Fubon Financial vs. Chung Hung Steel |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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