Correlation Between Capital Taiex and Fubon MSCI

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

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

Diversification Opportunities for Capital Taiex and Fubon MSCI

-0.92

Correlation Coefficient

Capital Taiex  Fubon MSCI

Pay attention - limited upside

The 3 months correlation between Capital and Fubon is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Capital Taiex Daily and Fubon MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon MSCI Taiwan and Capital Taiex 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 Capital Taiex Daily are associated (or correlated) with Fubon MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon MSCI Taiwan has no effect on the direction of Capital Taiex i.e., Capital Taiex and Fubon MSCI go up and down completely randomly.

Pair Corralation between Capital Taiex and Fubon MSCI

Assuming the 90 days trading horizon Capital Taiex Daily is expected to under-perform the Fubon MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Capital Taiex Daily is 1.23 times less risky than Fubon MSCI. The etf trades about -0.12 of its potential returns per unit of risk. The Fubon MSCI Taiwan is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,185  in Fubon MSCI Taiwan on September 12, 2024 and sell it today you would earn a total of  1,150  from holding Fubon MSCI Taiwan or generate 8.72% return on investment over 90 days.

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

Capital Taiex Daily  vs.  Fubon MSCI Taiwan

Capital Taiex Daily

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Taiex Daily has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Fubon MSCI Taiwan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fubon MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capital Taiex and Fubon MSCI

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

The idea behind Capital Taiex Daily and Fubon MSCI Taiwan 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..