Correlation Between Fubon MSCI and Fubon NIFTY

Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and Fubon NIFTY 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 Fubon NIFTY 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 Fubon NIFTY, you can compare the effects of market volatilities on Fubon MSCI and Fubon NIFTY 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 Fubon NIFTY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and Fubon NIFTY.

Diversification Opportunities for Fubon MSCI and Fubon NIFTY

0.27

Correlation Coefficient

Fubon MSCI  Fubon NIFTY

Modest diversification

The 3 months correlation between Fubon and Fubon is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Fubon NIFTY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon NIFTY 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 Fubon NIFTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon NIFTY has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Fubon NIFTY go up and down completely randomly.

Pair Corralation between Fubon MSCI and Fubon NIFTY

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Fubon NIFTY. In addition to that, Fubon MSCI is 1.72 times more volatile than Fubon NIFTY. It trades about -0.12 of its total potential returns per unit of risk. Fubon NIFTY is currently generating about -0.01 per unit of volatility. If you would invest  3,757  in Fubon NIFTY on December 29, 2024 and sell it today you would lose (26.00) from holding Fubon NIFTY or give up 0.69% of portfolio value over 90 days.

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

Fubon MSCI Taiwan  vs.  Fubon NIFTY

Fubon MSCI Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fubon MSCI Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Fubon NIFTY

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fubon NIFTY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon NIFTY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fubon MSCI and Fubon NIFTY

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

The idea behind Fubon MSCI Taiwan and Fubon NIFTY 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.