Correlation Between Fubon Financial and United Radiant
Can any of the company-specific risk be diversified away by investing in both Fubon Financial and United Radiant 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 United Radiant 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 United Radiant Technology, you can compare the effects of market volatilities on Fubon Financial and United Radiant 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 United Radiant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Financial and United Radiant.
Diversification Opportunities for Fubon Financial and United Radiant
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fubon and United is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Financial Holding and United Radiant Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Radiant Technology 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 United Radiant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Radiant Technology has no effect on the direction of Fubon Financial i.e., Fubon Financial and United Radiant go up and down completely randomly.
Pair Corralation between Fubon Financial and United Radiant
Assuming the 90 days trading horizon Fubon Financial Holding is expected to generate 0.04 times more return on investment than United Radiant. However, Fubon Financial Holding is 26.1 times less risky than United Radiant. It trades about 0.65 of its potential returns per unit of risk. United Radiant Technology is currently generating about -0.08 per unit of risk. If you would invest 6,050 in Fubon Financial Holding on November 7, 2024 and sell it today you would earn a total of 50.00 from holding Fubon Financial Holding or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Financial Holding vs. United Radiant Technology
Performance |
| Timeline |
| Fubon Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| United Radiant Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fubon Financial and United Radiant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Financial and United Radiant
The main advantage of trading using opposite Fubon Financial and United Radiant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Financial position performs unexpectedly, United Radiant 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 United Radiant will offset losses from the drop in United Radiant's long position.The idea behind Fubon Financial Holding and United Radiant Technology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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