Correlation Between Wan Hai and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both Wan Hai 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 Wan Hai and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wan Hai Lines and Fubon Financial Holding, you can compare the effects of market volatilities on Wan Hai 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 Wan Hai with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Fubon Financial.
Diversification Opportunities for Wan Hai and Fubon Financial
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wan and Fubon is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines 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 Wan Hai 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 Wan Hai Lines 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 Wan Hai i.e., Wan Hai and Fubon Financial go up and down completely randomly.
Pair Corralation between Wan Hai and Fubon Financial
Assuming the 90 days trading horizon Wan Hai is expected to generate 2.97 times less return on investment than Fubon Financial. In addition to that, Wan Hai is 2.42 times more volatile than Fubon Financial Holding. It trades about 0.01 of its total potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.08 per unit of volatility. If you would invest 5,980 in Fubon Financial Holding on October 25, 2024 and sell it today you would earn a total of 3,300 from holding Fubon Financial Holding or generate 55.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Wan Hai Lines vs. Fubon Financial Holding
Performance |
| Timeline |
| Wan Hai Lines |
| Fubon Financial Holding |
Wan Hai and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wan Hai and Fubon Financial
The main advantage of trading using opposite Wan Hai and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai 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.| Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
| Fubon Financial vs. Emerging Display Technologies | Fubon Financial vs. Chinese Gamer International | Fubon Financial vs. Mosa Industrial Corp | Fubon Financial vs. Yi Jinn Industrial |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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