Correlation Between Fubon MSCI and Cathay DJIA

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

Diversification Opportunities for Fubon MSCI and Cathay DJIA

-0.77

Correlation Coefficient

Fubon MSCI  Cathay DJIA

Pay attention - limited upside

The 3 months correlation between Fubon and Cathay is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Cathay DJIA Inv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay DJIA Inv 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 DJIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay DJIA Inv has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Cathay DJIA go up and down completely randomly.

Pair Corralation between Fubon MSCI and Cathay DJIA

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Cathay DJIA. In addition to that, Fubon MSCI is 1.52 times more volatile than Cathay DJIA Inv. It trades about -0.12 of its total potential returns per unit of risk. Cathay DJIA Inv is currently generating about 0.06 per unit of volatility. If you would invest  666.00  in Cathay DJIA Inv on December 30, 2024 and sell it today you would earn a total of  17.00  from holding Cathay DJIA Inv or generate 2.55% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Cathay DJIA Inv

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 DJIA Inv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay DJIA Inv are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cathay DJIA 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 DJIA

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

The idea behind Fubon MSCI Taiwan and Cathay DJIA Inv 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.