Correlation Between ESUN Financial and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Fubon Financial 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 ESUN Financial and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESUN Financial Holding and Fubon Financial Holding, you can compare the effects of market volatilities on ESUN Financial and Fubon Financial 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 ESUN Financial with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Fubon Financial.
Diversification Opportunities for ESUN Financial and Fubon Financial
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ESUN and Fubon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Fubon Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Financial Holding and ESUN 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 ESUN Financial Holding are associated (or correlated) with Fubon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Financial Holding has no effect on the direction of ESUN Financial i.e., ESUN Financial and Fubon Financial go up and down completely randomly.
Pair Corralation between ESUN Financial and Fubon Financial
Assuming the 90 days trading horizon ESUN Financial Holding is expected to generate 0.95 times more return on investment than Fubon Financial. However, ESUN Financial Holding is 1.05 times less risky than Fubon Financial. It trades about 0.06 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about -0.07 per unit of risk. If you would invest 2,750 in ESUN Financial Holding on August 28, 2024 and sell it today you would earn a total of 30.00 from holding ESUN Financial Holding or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESUN Financial Holding vs. Fubon Financial Holding
Performance |
| Timeline |
| ESUN Financial Holding |
| Fubon Financial Holding |
ESUN Financial and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Fubon Financial
The main advantage of trading using opposite ESUN Financial and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial position performs unexpectedly, Fubon Financial 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 Fubon Financial will offset losses from the drop in Fubon Financial's long position.| ESUN Financial vs. Mega Financial Holding | ESUN Financial vs. CTBC Financial Holding | ESUN Financial vs. First Financial Holding | ESUN Financial vs. Fubon Financial Holding |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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