Correlation Between Fubon Financial and Mega Financial
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and Mega 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 Fubon Financial and Mega Financial 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 Mega Financial Holding, you can compare the effects of market volatilities on Fubon Financial and Mega 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 Fubon Financial with a short position of Mega Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and Mega Financial.
Diversification Opportunities for Fubon Financial and Mega Financial
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fubon and Mega is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Mega Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Financial Holding 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 Mega Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Financial Holding has no effect on the direction of Fubon Financial i.e., Fubon Financial and Mega Financial go up and down completely randomly.
Pair Corralation between Fubon Financial and Mega Financial
Assuming the 90 days trading horizon Fubon Financial Holding is expected to under-perform the Mega Financial. In addition to that, Fubon Financial is 1.26 times more volatile than Mega Financial Holding. It trades about -0.14 of its total potential returns per unit of risk. Mega Financial Holding is currently generating about 0.08 per unit of volatility. If you would invest 3,890 in Mega Financial Holding on August 24, 2024 and sell it today you would earn a total of 55.00 from holding Mega Financial Holding or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Financial Holding vs. Mega Financial Holding
Performance |
| Timeline |
| Fubon Financial Holding |
| Mega Financial Holding |
Fubon Financial and Mega Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and Mega Financial
The main advantage of trading using opposite Fubon Financial and Mega Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, Mega 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 Mega Financial will offset losses from the drop in Mega Financial's long position.The idea behind Fubon Financial Holding and Mega Financial Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Mega Financial vs. Fubon Financial Holding | Mega Financial vs. Cathay Financial Holding | Mega Financial vs. ESUN 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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