Correlation Between Tai Tung and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both Tai Tung 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 Tai Tung and Fubon Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tai Tung Communication and Fubon Financial Holding, you can compare the effects of market volatilities on Tai Tung 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 Tai Tung with a short position of Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and Fubon Financial.
Diversification Opportunities for Tai Tung and Fubon Financial
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tai and Fubon is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication 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 Tai Tung 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 Tai Tung Communication 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 Tai Tung i.e., Tai Tung and Fubon Financial go up and down completely randomly.
Pair Corralation between Tai Tung and Fubon Financial
Assuming the 90 days trading horizon Tai Tung Communication is expected to generate 2.5 times more return on investment than Fubon Financial. However, Tai Tung is 2.5 times more volatile than Fubon Financial Holding. It trades about 0.06 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.09 per unit of risk. If you would invest 1,530 in Tai Tung Communication on August 29, 2024 and sell it today you would earn a total of 1,210 from holding Tai Tung Communication or generate 79.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tai Tung Communication vs. Fubon Financial Holding
Performance |
| Timeline |
| Tai Tung Communication |
| Fubon Financial Holding |
Tai Tung and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tai Tung and Fubon Financial
The main advantage of trading using opposite Tai Tung and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tai Tung 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.| Tai Tung vs. Zinwell | Tai Tung vs. Mercuries Life Insurance | Tai Tung vs. Darwin Precisions Corp | Tai Tung vs. Jinli Group Holdings |
| Fubon Financial vs. Tait Marketing Distribution | Fubon Financial vs. Cameo Communications | Fubon Financial vs. Ligitek Electronics Co | Fubon Financial vs. Excellence Optoelectronic |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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