Correlation Between Fubon Financial and Feng Ching
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and Feng Ching 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 Feng Ching 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 Feng Ching Metal, you can compare the effects of market volatilities on Fubon Financial and Feng Ching 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 Feng Ching. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and Feng Ching.
Diversification Opportunities for Fubon Financial and Feng Ching
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fubon and Feng is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Feng Ching Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Feng Ching Metal 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 Feng Ching. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Feng Ching Metal has no effect on the direction of Fubon Financial i.e., Fubon Financial and Feng Ching go up and down completely randomly.
Pair Corralation between Fubon Financial and Feng Ching
Assuming the 90 days trading horizon Fubon Financial is expected to generate 10.76 times less return on investment than Feng Ching. But when comparing it to its historical volatility, Fubon Financial Holding is 15.45 times less risky than Feng Ching. It trades about 0.07 of its potential returns per unit of risk. Feng Ching Metal is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,780 in Feng Ching Metal on November 3, 2024 and sell it today you would earn a total of 25.00 from holding Feng Ching Metal or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Financial Holding vs. Feng Ching Metal
Performance |
| Timeline |
| Fubon Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Feng Ching Metal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fubon Financial and Feng Ching Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and Feng Ching
The main advantage of trading using opposite Fubon Financial and Feng Ching positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, Feng Ching 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 Feng Ching will offset losses from the drop in Feng Ching's long position.The idea behind Fubon Financial Holding and Feng Ching Metal 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.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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