Correlation Between Fubon MSCI and Jean

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

Diversification Opportunities for Fubon MSCI and Jean

-0.56

Correlation Coefficient

Fubon MSCI  Jean

Excellent diversification

The 3 months correlation between Fubon and Jean is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Jean Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jean 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 Jean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jean has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Jean go up and down completely randomly.

Pair Corralation between Fubon MSCI and Jean

Assuming the 90 days trading horizon Fubon MSCI is expected to generate 1.28 times less return on investment than Jean. But when comparing it to its historical volatility, Fubon MSCI Taiwan is 2.04 times less risky than Jean. It trades about 0.1 of its potential returns per unit of risk. Jean Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,330  in Jean Co on September 29, 2024 and sell it today you would earn a total of  1,185  from holding Jean Co or generate 89.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Fubon MSCI Taiwan  vs.  Jean Co

Fubon MSCI Taiwan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fubon MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jean

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fubon MSCI and Jean

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

The idea behind Fubon MSCI Taiwan and Jean 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.