Correlation Between Fubon MSCI and Kuo Yang

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

Diversification Opportunities for Fubon MSCI and Kuo Yang

-0.25

Correlation Coefficient

Fubon MSCI  Kuo Yang

Very good diversification

The 3 months correlation between Fubon and Kuo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Kuo Yang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuo Yang Construction 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 Kuo Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuo Yang Construction has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Kuo Yang go up and down completely randomly.

Pair Corralation between Fubon MSCI and Kuo Yang

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Kuo Yang. But the etf apears to be less risky and, when comparing its historical volatility, Fubon MSCI Taiwan is 1.16 times less risky than Kuo Yang. The etf trades about -0.03 of its potential returns per unit of risk. The Kuo Yang Construction is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,045  in Kuo Yang Construction on December 5, 2024 and sell it today you would earn a total of  150.00  from holding Kuo Yang Construction or generate 7.33% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Kuo Yang Construction

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.

Kuo Yang Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kuo Yang Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kuo Yang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fubon MSCI and Kuo Yang

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

The idea behind Fubon MSCI Taiwan and Kuo Yang Construction 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.