Correlation Between Fubon MSCI and SuperAlloy Industrial

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

Diversification Opportunities for Fubon MSCI and SuperAlloy Industrial

0.03

Correlation Coefficient

Fubon MSCI  SuperAlloy Industrial

Significant diversification

The 3 months correlation between Fubon and SuperAlloy is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and SuperAlloy Industrial Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SuperAlloy Industrial Co, 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 SuperAlloy Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SuperAlloy Industrial Co, has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and SuperAlloy Industrial go up and down completely randomly.

Pair Corralation between Fubon MSCI and SuperAlloy Industrial

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the SuperAlloy Industrial. But the etf apears to be less risky and, when comparing its historical volatility, Fubon MSCI Taiwan is 1.48 times less risky than SuperAlloy Industrial. The etf trades about -0.03 of its potential returns per unit of risk. The SuperAlloy Industrial Co, is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,960  in SuperAlloy Industrial Co, on December 4, 2024 and sell it today you would earn a total of  710.00  from holding SuperAlloy Industrial Co, or generate 11.91% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  SuperAlloy Industrial Co,

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.

SuperAlloy Industrial Co,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SuperAlloy Industrial Co, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SuperAlloy Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon MSCI and SuperAlloy Industrial

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

The idea behind Fubon MSCI Taiwan and SuperAlloy Industrial Co, 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.