Correlation Between Fubon MSCI and YuantaP Shares
Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and YuantaP Shares 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 YuantaP Shares 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 YuantaP shares Taiwan Dividend, you can compare the effects of market volatilities on Fubon MSCI and YuantaP Shares 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 YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and YuantaP Shares.
Diversification Opportunities for Fubon MSCI and YuantaP Shares
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fubon and YuantaP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and YuantaP shares Taiwan Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares Taiwan 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 YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares Taiwan has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and YuantaP Shares go up and down completely randomly.
Pair Corralation between Fubon MSCI and YuantaP Shares
Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the YuantaP Shares. In addition to that, Fubon MSCI is 1.98 times more volatile than YuantaP shares Taiwan Dividend. It trades about -0.11 of its total potential returns per unit of risk. YuantaP shares Taiwan Dividend is currently generating about -0.12 per unit of volatility. If you would invest 3,794 in YuantaP shares Taiwan Dividend on August 29, 2024 and sell it today you would lose (63.00) from holding YuantaP shares Taiwan Dividend or give up 1.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon MSCI Taiwan vs. YuantaP shares Taiwan Dividend
Performance |
| Timeline |
| Fubon MSCI Taiwan |
| YuantaP shares Taiwan |
Fubon MSCI and YuantaP Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon MSCI and YuantaP Shares
The main advantage of trading using opposite Fubon MSCI and YuantaP Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, YuantaP Shares 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 YuantaP Shares will offset losses from the drop in YuantaP Shares' long position.The idea behind Fubon MSCI Taiwan and YuantaP shares Taiwan Dividend 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.Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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