Correlation Between YuantaP Shares and Fubon NASDAQ

Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and Fubon NASDAQ 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 YuantaP Shares and Fubon NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YuantaP shares Taiwan GreTai and Fubon NASDAQ 100 1X, you can compare the effects of market volatilities on YuantaP Shares and Fubon NASDAQ 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 YuantaP Shares with a short position of Fubon NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Fubon NASDAQ.

Diversification Opportunities for YuantaP Shares and Fubon NASDAQ

-0.86

Correlation Coefficient

YuantaP Shares  Fubon NASDAQ

Pay attention - limited upside

The 3 months correlation between YuantaP and Fubon is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan GreTai and Fubon NASDAQ 100 1X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon NASDAQ 100 and YuantaP Shares 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 YuantaP shares Taiwan GreTai are associated (or correlated) with Fubon NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon NASDAQ 100 has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Fubon NASDAQ go up and down completely randomly.

Pair Corralation between YuantaP Shares and Fubon NASDAQ

Assuming the 90 days trading horizon YuantaP shares Taiwan GreTai is expected to under-perform the Fubon NASDAQ. In addition to that, YuantaP Shares is 1.3 times more volatile than Fubon NASDAQ 100 1X. It trades about -0.12 of its total potential returns per unit of risk. Fubon NASDAQ 100 1X is currently generating about 0.11 per unit of volatility. If you would invest  408.00  in Fubon NASDAQ 100 1X on February 5, 2024 and sell it today you would earn a total of  12.00  from holding Fubon NASDAQ 100 1X or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

YuantaP shares Taiwan GreTai  vs.  Fubon NASDAQ 100 1X

YuantaP shares Taiwan

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares Taiwan GreTai are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, YuantaP Shares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Fubon NASDAQ 100

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon NASDAQ 100 1X are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fubon NASDAQ is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with YuantaP Shares and Fubon NASDAQ

The main advantage of trading using opposite YuantaP Shares and Fubon NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YuantaP Shares position performs unexpectedly, Fubon NASDAQ 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 NASDAQ will offset losses from the drop in Fubon NASDAQ's long position.

The idea behind YuantaP shares Taiwan GreTai and Fubon NASDAQ 100 1X 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.