Correlation Between Fubon Financial and China Development
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and China Development 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 Development 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 Development Financial, you can compare the effects of market volatilities on Fubon Financial and China Development 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 Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and China Development.
Diversification Opportunities for Fubon Financial and China Development
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fubon and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and China Development Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Development 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 Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Development has no effect on the direction of Fubon Financial i.e., Fubon Financial and China Development go up and down completely randomly.
Pair Corralation between Fubon Financial and China Development
Assuming the 90 days trading horizon Fubon Financial Holding is expected to generate 0.91 times more return on investment than China Development. However, Fubon Financial Holding is 1.1 times less risky than China Development. It trades about 0.08 of its potential returns per unit of risk. China Development Financial is currently generating about 0.05 per unit of risk. If you would invest 5,820 in Fubon Financial Holding on August 28, 2024 and sell it today you would earn a total of 3,230 from holding Fubon Financial Holding or generate 55.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Financial Holding vs. China Development Financial
Performance |
| Timeline |
| Fubon Financial Holding |
| China Development |
Fubon Financial and China Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and China Development
The main advantage of trading using opposite Fubon Financial and China Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, China Development 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 Development will offset losses from the drop in China Development's long position.| Fubon Financial vs. Healthconn Corp | Fubon Financial vs. General Plastic Industrial | Fubon Financial vs. Eternal Materials Co | Fubon Financial vs. Asia Electronic Material |
| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development vs. Fubon Financial Holding |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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