Correlation Between Fubon MSCI and Chenming Mold

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

Diversification Opportunities for Fubon MSCI and Chenming Mold

0.36

Correlation Coefficient

Fubon MSCI  Chenming Mold

Weak diversification

The 3 months correlation between Fubon and Chenming is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Chenming Mold Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chenming Mold Industrial 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 Chenming Mold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chenming Mold Industrial has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Chenming Mold go up and down completely randomly.

Pair Corralation between Fubon MSCI and Chenming Mold

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 0.4 times more return on investment than Chenming Mold. However, Fubon MSCI Taiwan is 2.51 times less risky than Chenming Mold. It trades about -0.12 of its potential returns per unit of risk. Chenming Mold Industrial is currently generating about -0.07 per unit of risk. If you would invest  14,565  in Fubon MSCI Taiwan on December 30, 2024 and sell it today you would lose (1,255) from holding Fubon MSCI Taiwan or give up 8.62% of portfolio value over 90 days.

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

Fubon MSCI Taiwan  vs.  Chenming Mold Industrial

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.

Chenming Mold Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chenming Mold Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Fubon MSCI and Chenming Mold

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

The idea behind Fubon MSCI Taiwan and Chenming Mold Industrial 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .