Correlation Between Fubon MSCI and Capital Tip
Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and Capital Tip 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 Capital Tip 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 Capital Tip Customized, you can compare the effects of market volatilities on Fubon MSCI and Capital Tip 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 Capital Tip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and Capital Tip.
Diversification Opportunities for Fubon MSCI and Capital Tip
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fubon and Capital is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Capital Tip Customized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Tip Customized 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 Capital Tip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Tip Customized has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Capital Tip go up and down completely randomly.
Pair Corralation between Fubon MSCI and Capital Tip
Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 1.12 times more return on investment than Capital Tip. However, Fubon MSCI is 1.12 times more volatile than Capital Tip Customized. It trades about 0.06 of its potential returns per unit of risk. Capital Tip Customized is currently generating about 0.05 per unit of risk. If you would invest 11,955 in Fubon MSCI Taiwan on November 7, 2024 and sell it today you would earn a total of 2,355 from holding Fubon MSCI Taiwan or generate 19.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.02% |
| Values | Daily Returns |
Fubon MSCI Taiwan vs. Capital Tip Customized
Performance |
| Timeline |
| Fubon MSCI Taiwan |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Capital Tip Customized |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fubon MSCI and Capital Tip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon MSCI and Capital Tip
The main advantage of trading using opposite Fubon MSCI and Capital Tip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, Capital Tip 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 Capital Tip will offset losses from the drop in Capital Tip's long position.The idea behind Fubon MSCI Taiwan and Capital Tip Customized 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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