Correlation Between Fubon MSCI and Chumpower Machinery

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

Diversification Opportunities for Fubon MSCI and Chumpower Machinery

0.4

Correlation Coefficient

Fubon MSCI  Chumpower Machinery

Very weak diversification

The 3 months correlation between Fubon and Chumpower is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Chumpower Machinery Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chumpower Machinery Corp 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 Chumpower Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chumpower Machinery Corp has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Chumpower Machinery go up and down completely randomly.

Pair Corralation between Fubon MSCI and Chumpower Machinery

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Chumpower Machinery. But the etf apears to be less risky and, when comparing its historical volatility, Fubon MSCI Taiwan is 1.12 times less risky than Chumpower Machinery. The etf trades about -0.04 of its potential returns per unit of risk. The Chumpower Machinery Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,130  in Chumpower Machinery Corp on December 5, 2024 and sell it today you would earn a total of  270.00  from holding Chumpower Machinery Corp or generate 12.68% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Chumpower Machinery Corp

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.

Chumpower Machinery Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chumpower Machinery Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chumpower Machinery showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon MSCI and Chumpower Machinery

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

The idea behind Fubon MSCI Taiwan and Chumpower Machinery Corp 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.