Correlation Between Fubon MSCI and Cathay TAIEX

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

Diversification Opportunities for Fubon MSCI and Cathay TAIEX

-0.96

Correlation Coefficient

Fubon MSCI  Cathay TAIEX

Pay attention - limited upside

The 3 months correlation between Fubon and Cathay is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Cathay TAIEX Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay TAIEX Daily 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 Cathay TAIEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay TAIEX Daily has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Cathay TAIEX go up and down completely randomly.

Pair Corralation between Fubon MSCI and Cathay TAIEX

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Cathay TAIEX. In addition to that, Fubon MSCI is 1.17 times more volatile than Cathay TAIEX Daily. It trades about -0.1 of its total potential returns per unit of risk. Cathay TAIEX Daily is currently generating about 0.08 per unit of volatility. If you would invest  369.00  in Cathay TAIEX Daily on December 28, 2024 and sell it today you would earn a total of  18.00  from holding Cathay TAIEX Daily or generate 4.88% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Cathay TAIEX Daily

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.

Cathay TAIEX Daily

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay TAIEX Daily are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cathay TAIEX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fubon MSCI and Cathay TAIEX

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

The idea behind Fubon MSCI Taiwan and Cathay TAIEX Daily 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..