Correlation Between Formosan Rubber and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both Formosan Rubber 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 Formosan Rubber and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosan Rubber Group and Fubon Financial Holding, you can compare the effects of market volatilities on Formosan Rubber 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 Formosan Rubber with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and Fubon Financial.
Diversification Opportunities for Formosan Rubber and Fubon Financial
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Formosan and Fubon is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group 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 Formosan Rubber 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 Formosan Rubber Group 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 Formosan Rubber i.e., Formosan Rubber and Fubon Financial go up and down completely randomly.
Pair Corralation between Formosan Rubber and Fubon Financial
Assuming the 90 days trading horizon Formosan Rubber Group is expected to generate 3.59 times more return on investment than Fubon Financial. However, Formosan Rubber is 3.59 times more volatile than Fubon Financial Holding. It trades about 0.04 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.02 per unit of risk. If you would invest 2,200 in Formosan Rubber Group on October 21, 2024 and sell it today you would earn a total of 370.00 from holding Formosan Rubber Group or generate 16.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Rubber Group vs. Fubon Financial Holding
Performance |
| Timeline |
| Formosan Rubber Group |
| Fubon Financial Holding |
Formosan Rubber and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Rubber and Fubon Financial
The main advantage of trading using opposite Formosan Rubber and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Rubber 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.| Formosan Rubber vs. Nankang Rubber Tire | Formosan Rubber vs. Federal Corp | Formosan Rubber vs. Kenda Rubber Industrial | Formosan Rubber vs. Yulon Motor Co |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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