Correlation Between Fubon MSCI and Te Chang

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

Diversification Opportunities for Fubon MSCI and Te Chang

0.61

Correlation Coefficient

Fubon MSCI  Te Chang

Poor diversification

The 3 months correlation between Fubon and 5511 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang 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 Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Te Chang go up and down completely randomly.

Pair Corralation between Fubon MSCI and Te Chang

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Te Chang. In addition to that, Fubon MSCI is 1.63 times more volatile than Te Chang Construction. It trades about -0.03 of its total potential returns per unit of risk. Te Chang Construction is currently generating about 0.0 per unit of volatility. If you would invest  6,210  in Te Chang Construction on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Te Chang Construction or generate 0.0% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Te Chang Construction

Fubon MSCI Taiwan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fubon MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Te Chang Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fubon MSCI and Te Chang

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

The idea behind Fubon MSCI Taiwan and Te Chang 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.