Correlation Between Fubon MSCI and Ruentex Development

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

Diversification Opportunities for Fubon MSCI and Ruentex Development

-0.05

Correlation Coefficient

Fubon MSCI  Ruentex Development

Good diversification

The 3 months correlation between Fubon and Ruentex is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Ruentex Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Development 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 Ruentex Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Development has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Ruentex Development go up and down completely randomly.

Pair Corralation between Fubon MSCI and Ruentex Development

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Ruentex Development. But the etf apears to be less risky and, when comparing its historical volatility, Fubon MSCI Taiwan is 1.42 times less risky than Ruentex Development. The etf trades about -0.03 of its potential returns per unit of risk. The Ruentex Development Co is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest  3,450  in Ruentex Development Co on February 4, 2024 and sell it today you would earn a total of  795.00  from holding Ruentex Development Co or generate 23.04% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Ruentex Development Co

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 uncertain basic indicators, Fubon MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Ruentex Development

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Fubon MSCI and Ruentex Development

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

The idea behind Fubon MSCI Taiwan and Ruentex Development 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.