Correlation Between Fubon MSCI and AP Memory

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

Diversification Opportunities for Fubon MSCI and AP Memory

0.75

Correlation Coefficient

Fubon MSCI  AP Memory

Poor diversification

The 3 months correlation between Fubon and 6531 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and AP Memory Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Memory Technology 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 AP Memory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Memory Technology has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and AP Memory go up and down completely randomly.

Pair Corralation between Fubon MSCI and AP Memory

Assuming the 90 days trading horizon Fubon MSCI is expected to generate 1.1 times less return on investment than AP Memory. But when comparing it to its historical volatility, Fubon MSCI Taiwan is 1.54 times less risky than AP Memory. It trades about 0.11 of its potential returns per unit of risk. AP Memory Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  29,150  in AP Memory Technology on September 14, 2024 and sell it today you would earn a total of  2,550  from holding AP Memory Technology or generate 8.75% 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.  AP Memory Technology

Fubon MSCI Taiwan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Fubon MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AP Memory Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Memory Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AP Memory may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fubon MSCI and AP Memory

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

The idea behind Fubon MSCI Taiwan and AP Memory Technology 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.