Correlation Between Fubon MSCI and Alchip Technologies

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

Diversification Opportunities for Fubon MSCI and Alchip Technologies

0.7

Correlation Coefficient

Fubon MSCI  Alchip Technologies

Poor diversification

The 3 months correlation between Fubon and Alchip is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Alchip Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchip Technologies 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 Alchip Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alchip Technologies has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Alchip Technologies go up and down completely randomly.

Pair Corralation between Fubon MSCI and Alchip Technologies

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Alchip Technologies. But the etf apears to be less risky and, when comparing its historical volatility, Fubon MSCI Taiwan is 2.66 times less risky than Alchip Technologies. The etf trades about -0.12 of its potential returns per unit of risk. The Alchip Technologies is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  321,500  in Alchip Technologies on December 30, 2024 and sell it today you would lose (26,500) from holding Alchip Technologies or give up 8.24% of portfolio value over 90 days.

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

Fubon MSCI Taiwan  vs.  Alchip Technologies

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.

Alchip Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alchip Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Alchip Technologies 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 Alchip Technologies

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

The idea behind Fubon MSCI Taiwan and Alchip Technologies 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.