Correlation Between First Financial and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both First 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 First 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 First Financial Holding and Fubon Financial Holding, you can compare the effects of market volatilities on First 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 First Financial with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Fubon Financial.
Diversification Opportunities for First Financial and Fubon Financial
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Fubon is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding First 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 First 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 First 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 First Financial i.e., First Financial and Fubon Financial go up and down completely randomly.
Pair Corralation between First Financial and Fubon Financial
Assuming the 90 days trading horizon First Financial is expected to generate 1.21 times less return on investment than Fubon Financial. But when comparing it to its historical volatility, First Financial Holding is 1.18 times less risky than Fubon Financial. It trades about 0.07 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,180 in Fubon Financial Holding on October 25, 2024 and sell it today you would earn a total of 100.00 from holding Fubon Financial Holding or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Holding vs. Fubon Financial Holding
Performance |
| Timeline |
| First Financial Holding |
| Fubon Financial Holding |
First Financial and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Fubon Financial
The main advantage of trading using opposite First Financial and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First 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.| First Financial vs. Mega Financial Holding | First Financial vs. CTBC Financial Holding | First Financial vs. Hua Nan Financial | First Financial vs. ESUN Financial Holding |
| Fubon Financial vs. Taiwan Semiconductor Manufacturing | Fubon Financial vs. Evergreen Marine Corp | Fubon Financial vs. Yang Ming Marine | Fubon Financial vs. Wan Hai Lines |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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