Correlation Between Fubon MSCI and YuantaP Shares

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

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

Diversification Opportunities for Fubon MSCI and YuantaP Shares

0.47

Correlation Coefficient

Fubon MSCI  YuantaP Shares

Very weak diversification

The 3 months correlation between Fubon and YuantaP is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and YuantaP shares MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares MSCI and Fubon MSCI 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 MSCI Taiwan are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares MSCI has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and YuantaP Shares go up and down completely randomly.

Pair Corralation between Fubon MSCI and YuantaP Shares

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 0.99 times more return on investment than YuantaP Shares. However, Fubon MSCI Taiwan is 1.01 times less risky than YuantaP Shares. It trades about 0.06 of its potential returns per unit of risk. YuantaP shares MSCI Taiwan is currently generating about 0.05 per unit of risk. If you would invest  14,365  in Fubon MSCI Taiwan on October 14, 2024 and sell it today you would earn a total of  175.00  from holding Fubon MSCI Taiwan or generate 1.22% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  YuantaP shares MSCI Taiwan

Fubon MSCI Taiwan

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fubon MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

YuantaP shares MSCI

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares MSCI Taiwan are ranked lower than 2 (%) 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.

Pair Trading with Fubon MSCI and YuantaP Shares

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

The idea behind Fubon MSCI Taiwan and YuantaP shares MSCI Taiwan 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.