Correlation Between Fubon MSCI and CTBC 15

Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and CTBC 15 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 CTBC 15 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 CTBC 15 Developed, you can compare the effects of market volatilities on Fubon MSCI and CTBC 15 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 CTBC 15. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and CTBC 15.

Diversification Opportunities for Fubon MSCI and CTBC 15

-0.5

Correlation Coefficient

Fubon MSCI  CTBC 15

Very good diversification

The 3 months correlation between Fubon and CTBC is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and CTBC 15 Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC 15 Developed 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 CTBC 15. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC 15 Developed has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and CTBC 15 go up and down completely randomly.

Pair Corralation between Fubon MSCI and CTBC 15

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the CTBC 15. In addition to that, Fubon MSCI is 1.99 times more volatile than CTBC 15 Developed. It trades about -0.07 of its total potential returns per unit of risk. CTBC 15 Developed is currently generating about 0.04 per unit of volatility. If you would invest  3,236  in CTBC 15 Developed on December 22, 2024 and sell it today you would earn a total of  45.00  from holding CTBC 15 Developed or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Fubon MSCI Taiwan  vs.  CTBC 15 Developed

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 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.

CTBC 15 Developed

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC 15 Developed are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CTBC 15 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fubon MSCI and CTBC 15

The main advantage of trading using opposite Fubon MSCI and CTBC 15 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, CTBC 15 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 CTBC 15 will offset losses from the drop in CTBC 15's long position.

The idea behind Fubon MSCI Taiwan and CTBC 15 Developed 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.