Correlation Between Fubon Financial and China Steel
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and China Steel 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 Fubon Financial and China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon Financial Holding and China Steel Corp, you can compare the effects of market volatilities on Fubon Financial and China Steel 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 Fubon Financial with a short position of China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and China Steel.
Diversification Opportunities for Fubon Financial and China Steel
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fubon and China is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp and Fubon Financial 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 Fubon Financial Holding are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Corp has no effect on the direction of Fubon Financial i.e., Fubon Financial and China Steel go up and down completely randomly.
Pair Corralation between Fubon Financial and China Steel
Assuming the 90 days trading horizon Fubon Financial Holding is expected to generate 0.89 times more return on investment than China Steel. However, Fubon Financial Holding is 1.12 times less risky than China Steel. It trades about -0.07 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.08 per unit of risk. If you would invest 9,190 in Fubon Financial Holding on August 28, 2024 and sell it today you would lose (140.00) from holding Fubon Financial Holding or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Financial Holding vs. China Steel Corp
Performance |
| Timeline |
| Fubon Financial Holding |
| China Steel Corp |
Fubon Financial and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and China Steel
The main advantage of trading using opposite Fubon Financial and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, China Steel 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 China Steel will offset losses from the drop in China Steel's long position.| Fubon Financial vs. Tait Marketing Distribution | Fubon Financial vs. Cameo Communications | Fubon Financial vs. Ligitek Electronics Co | Fubon Financial vs. Excellence Optoelectronic |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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