Correlation Between Fubon MSCI and Thye Ming

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

Diversification Opportunities for Fubon MSCI and Thye Ming

0.25

Correlation Coefficient

Fubon MSCI  Thye Ming

Modest diversification

The 3 months correlation between Fubon and Thye is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Thye Ming Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thye Ming Industrial 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 Thye Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thye Ming Industrial has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Thye Ming go up and down completely randomly.

Pair Corralation between Fubon MSCI and Thye Ming

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Thye Ming. In addition to that, Fubon MSCI is 1.56 times more volatile than Thye Ming Industrial. It trades about -0.03 of its total potential returns per unit of risk. Thye Ming Industrial is currently generating about 0.13 per unit of volatility. If you would invest  6,580  in Thye Ming Industrial on December 4, 2024 and sell it today you would earn a total of  380.00  from holding Thye Ming Industrial or generate 5.78% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Thye Ming Industrial

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.

Thye Ming Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thye Ming Industrial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Thye Ming may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fubon MSCI and Thye Ming

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

The idea behind Fubon MSCI Taiwan and Thye Ming Industrial 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.