Correlation Between Fubon MSCI and Chia Yi

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

Diversification Opportunities for Fubon MSCI and Chia Yi

-0.69

Correlation Coefficient

Fubon MSCI  Chia Yi

Excellent diversification

The 3 months correlation between Fubon and Chia is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi Steel 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 Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Chia Yi go up and down completely randomly.

Pair Corralation between Fubon MSCI and Chia Yi

Assuming the 90 days trading horizon Fubon MSCI is expected to generate 7.6 times less return on investment than Chia Yi. In addition to that, Fubon MSCI is 1.06 times more volatile than Chia Yi Steel. It trades about 0.01 of its total potential returns per unit of risk. Chia Yi Steel is currently generating about 0.06 per unit of volatility. If you would invest  1,240  in Chia Yi Steel on January 28, 2024 and sell it today you would earn a total of  20.00  from holding Chia Yi Steel or generate 1.61% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Chia Yi Steel

Fubon MSCI Taiwan

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Fubon MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Chia Yi Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chia Yi Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chia Yi is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fubon MSCI and Chia Yi

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

The idea behind Fubon MSCI Taiwan and Chia Yi Steel 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.