Correlation Between Fubon Financial and Lian Hwa
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and Lian Hwa 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 Lian Hwa 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 Lian Hwa Foods, you can compare the effects of market volatilities on Fubon Financial and Lian Hwa 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 Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and Lian Hwa.
Diversification Opportunities for Fubon Financial and Lian Hwa
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fubon and Lian is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods 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 Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Fubon Financial i.e., Fubon Financial and Lian Hwa go up and down completely randomly.
Pair Corralation between Fubon Financial and Lian Hwa
Assuming the 90 days trading horizon Fubon Financial Holding is not expected to generate positive returns. However, Fubon Financial Holding is 17.94 times less risky than Lian Hwa. It waists most of its returns potential to compensate for thr risk taken. Lian Hwa is generating about 0.11 per unit of risk. If you would invest 11,200 in Lian Hwa Foods on August 25, 2024 and sell it today you would earn a total of 350.00 from holding Lian Hwa Foods or generate 3.13% 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. Lian Hwa Foods
Performance |
| Timeline |
| Fubon Financial Holding |
| Lian Hwa Foods |
Fubon Financial and Lian Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and Lian Hwa
The main advantage of trading using opposite Fubon Financial and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, Lian Hwa 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 Lian Hwa will offset losses from the drop in Lian Hwa's long position.| Fubon Financial vs. CTBC Financial Holding | Fubon Financial vs. YuantaP shares Taiwan Top | Fubon Financial vs. YuantaP shares Taiwan Mid Cap | Fubon Financial vs. YuantaP shares Taiwan Electronics |
| Lian Hwa vs. Uni President Enterprises Corp | Lian Hwa vs. Taiwan Cement Corp | Lian Hwa vs. Ruentex Development Co | Lian Hwa vs. Symtek Automation Asia |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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