Correlation Between Fubon Financial and Lotus Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and Lotus Pharmaceutical 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 Lotus Pharmaceutical 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 Lotus Pharmaceutical Co, you can compare the effects of market volatilities on Fubon Financial and Lotus Pharmaceutical 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 Lotus Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and Lotus Pharmaceutical.
Diversification Opportunities for Fubon Financial and Lotus Pharmaceutical
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fubon and Lotus is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and Lotus Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Pharmaceutical 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 Lotus Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Pharmaceutical has no effect on the direction of Fubon Financial i.e., Fubon Financial and Lotus Pharmaceutical go up and down completely randomly.
Pair Corralation between Fubon Financial and Lotus Pharmaceutical
Assuming the 90 days trading horizon Fubon Financial is expected to generate 4.79 times less return on investment than Lotus Pharmaceutical. But when comparing it to its historical volatility, Fubon Financial Holding is 6.48 times less risky than Lotus Pharmaceutical. It trades about 0.02 of its potential returns per unit of risk. Lotus Pharmaceutical Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 28,900 in Lotus Pharmaceutical Co on September 1, 2024 and sell it today you would earn a total of 250.00 from holding Lotus Pharmaceutical Co or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Fubon Financial Holding vs. Lotus Pharmaceutical Co
Performance |
| Timeline |
| Fubon Financial Holding |
| Lotus Pharmaceutical |
Fubon Financial and Lotus Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and Lotus Pharmaceutical
The main advantage of trading using opposite Fubon Financial and Lotus Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, Lotus Pharmaceutical 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 Lotus Pharmaceutical will offset losses from the drop in Lotus Pharmaceutical's long position.| Fubon Financial vs. Fu Burg Industrial | Fubon Financial vs. Unique Optical Industrial | Fubon Financial vs. Tex Ray Industrial Co | Fubon Financial vs. Chialin Precision Industrial |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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