Correlation Between Fubon NIFTY and Fubon Taiwan

Can any of the company-specific risk be diversified away by investing in both Fubon NIFTY and Fubon Taiwan 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 NIFTY and Fubon Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fubon NIFTY and Fubon Taiwan Technology, you can compare the effects of market volatilities on Fubon NIFTY and Fubon Taiwan 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 NIFTY with a short position of Fubon Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon NIFTY and Fubon Taiwan.

Diversification Opportunities for Fubon NIFTY and Fubon Taiwan

0.38

Correlation Coefficient

Fubon NIFTY  Fubon Taiwan

Weak diversification

The 3 months correlation between Fubon and Fubon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fubon NIFTY and Fubon Taiwan Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Taiwan Technology and Fubon NIFTY 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 NIFTY are associated (or correlated) with Fubon Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Taiwan Technology has no effect on the direction of Fubon NIFTY i.e., Fubon NIFTY and Fubon Taiwan go up and down completely randomly.

Pair Corralation between Fubon NIFTY and Fubon Taiwan

Assuming the 90 days trading horizon Fubon NIFTY is expected to generate 0.53 times more return on investment than Fubon Taiwan. However, Fubon NIFTY is 1.89 times less risky than Fubon Taiwan. It trades about -0.06 of its potential returns per unit of risk. Fubon Taiwan Technology is currently generating about -0.09 per unit of risk. If you would invest  3,776  in Fubon NIFTY on December 22, 2024 and sell it today you would lose (101.00) from holding Fubon NIFTY or give up 2.67% of portfolio value over 90 days.

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

Fubon NIFTY  vs.  Fubon Taiwan Technology

Fubon NIFTY

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fubon NIFTY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon NIFTY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Fubon Taiwan Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fubon Taiwan Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Fubon NIFTY and Fubon Taiwan

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

The idea behind Fubon NIFTY and Fubon Taiwan 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 Global Correlations module to find global opportunities by holding instruments from different markets.