Correlation Between Fubon Financial and LandMark Optoelectronics
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and LandMark Optoelectronics 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 LandMark Optoelectronics 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 LandMark Optoelectronics, you can compare the effects of market volatilities on Fubon Financial and LandMark Optoelectronics 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 LandMark Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and LandMark Optoelectronics.
Diversification Opportunities for Fubon Financial and LandMark Optoelectronics
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fubon and LandMark is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and LandMark Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LandMark Optoelectronics 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 LandMark Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LandMark Optoelectronics has no effect on the direction of Fubon Financial i.e., Fubon Financial and LandMark Optoelectronics go up and down completely randomly.
Pair Corralation between Fubon Financial and LandMark Optoelectronics
Assuming the 90 days trading horizon Fubon Financial is expected to generate 39.58 times less return on investment than LandMark Optoelectronics. But when comparing it to its historical volatility, Fubon Financial Holding is 8.3 times less risky than LandMark Optoelectronics. It trades about 0.02 of its potential returns per unit of risk. LandMark Optoelectronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,520 in LandMark Optoelectronics on September 3, 2024 and sell it today you would earn a total of 22,780 from holding LandMark Optoelectronics or generate 197.74% 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. LandMark Optoelectronics
Performance |
| Timeline |
| Fubon Financial Holding |
| LandMark Optoelectronics |
Fubon Financial and LandMark Optoelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and LandMark Optoelectronics
The main advantage of trading using opposite Fubon Financial and LandMark Optoelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, LandMark Optoelectronics 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 LandMark Optoelectronics will offset losses from the drop in LandMark Optoelectronics' long position.| Fubon Financial vs. Arima Communications Corp | Fubon Financial vs. Gamania Digital Entertainment | Fubon Financial vs. Tehmag Foods | Fubon Financial vs. U Tech Media Corp |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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