Correlation Between Fubon MSCI and Yem Chio

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

Diversification Opportunities for Fubon MSCI and Yem Chio

0.77

Correlation Coefficient

Fubon MSCI  Yem Chio

Poor diversification

The 3 months correlation between Fubon and Yem is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Yem Chio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yem Chio 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 Yem Chio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yem Chio has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Yem Chio go up and down completely randomly.

Pair Corralation between Fubon MSCI and Yem Chio

Assuming the 90 days trading horizon Fubon MSCI is expected to generate 1.38 times less return on investment than Yem Chio. But when comparing it to its historical volatility, Fubon MSCI Taiwan is 1.07 times less risky than Yem Chio. It trades about 0.06 of its potential returns per unit of risk. Yem Chio Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,315  in Yem Chio Co on February 1, 2024 and sell it today you would earn a total of  775.00  from holding Yem Chio Co or generate 58.94% 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.  Yem Chio Co

Fubon MSCI Taiwan

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 17 (%) 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.

Yem Chio

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yem Chio Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yem Chio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon MSCI and Yem Chio

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

The idea behind Fubon MSCI Taiwan and Yem Chio Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.