Correlation Between Fubon Financial and Taiwan Steel
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and Taiwan 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 Taiwan 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 Taiwan Steel Union, you can compare the effects of market volatilities on Fubon Financial and Taiwan 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 Taiwan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and Taiwan Steel.
Diversification Opportunities for Fubon Financial and Taiwan Steel
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fubon and Taiwan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Taiwan Steel Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Steel Union 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 Taiwan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Steel Union has no effect on the direction of Fubon Financial i.e., Fubon Financial and Taiwan Steel go up and down completely randomly.
Pair Corralation between Fubon Financial and Taiwan Steel
Assuming the 90 days trading horizon Fubon Financial Holding is expected to generate 0.71 times more return on investment than Taiwan Steel. However, Fubon Financial Holding is 1.4 times less risky than Taiwan Steel. It trades about -0.1 of its potential returns per unit of risk. Taiwan Steel Union is currently generating about -0.22 per unit of risk. If you would invest 9,130 in Fubon Financial Holding on August 25, 2024 and sell it today you would lose (200.00) from holding Fubon Financial Holding or give up 2.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Financial Holding vs. Taiwan Steel Union
Performance |
| Timeline |
| Fubon Financial Holding |
| Taiwan Steel Union |
Fubon Financial and Taiwan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and Taiwan Steel
The main advantage of trading using opposite Fubon Financial and Taiwan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, Taiwan 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 Taiwan Steel will offset losses from the drop in Taiwan Steel's long position.| Fubon Financial vs. Tai Tung Communication | Fubon Financial vs. Tang Eng Iron | Fubon Financial vs. Cameo Communications | Fubon Financial vs. Chung Hung Steel |
| Taiwan Steel vs. Cleanaway Co | Taiwan Steel vs. Taiwan Secom Co | Taiwan Steel vs. TTET Union Corp | Taiwan Steel vs. Tehmag Foods |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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