Correlation Between Fubon MSCI and GCS Holdings

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

Diversification Opportunities for Fubon MSCI and GCS Holdings

0.68

Correlation Coefficient

Fubon MSCI  GCS Holdings

Poor diversification

The 3 months correlation between Fubon and GCS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and GCS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCS Holdings 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 GCS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCS Holdings has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and GCS Holdings go up and down completely randomly.

Pair Corralation between Fubon MSCI and GCS Holdings

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the GCS Holdings. But the etf apears to be less risky and, when comparing its historical volatility, Fubon MSCI Taiwan is 3.93 times less risky than GCS Holdings. The etf trades about -0.12 of its potential returns per unit of risk. The GCS Holdings is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  13,150  in GCS Holdings on December 29, 2024 and sell it today you would lose (1,000.00) from holding GCS Holdings or give up 7.6% 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.  GCS Holdings

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.

GCS Holdings

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Fubon MSCI Taiwan and GCS Holdings 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.