Correlation Between Fubon MSCI and China Metal
Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and China Metal 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 China Metal 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 China Metal Products, you can compare the effects of market volatilities on Fubon MSCI and China Metal 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 China Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and China Metal.
Diversification Opportunities for Fubon MSCI and China Metal
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fubon and China is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and China Metal Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Metal Products 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 China Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Metal Products has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and China Metal go up and down completely randomly.
Pair Corralation between Fubon MSCI and China Metal
Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 0.6 times more return on investment than China Metal. However, Fubon MSCI Taiwan is 1.67 times less risky than China Metal. It trades about -0.06 of its potential returns per unit of risk. China Metal Products is currently generating about -0.18 per unit of risk. If you would invest 14,400 in Fubon MSCI Taiwan on August 27, 2024 and sell it today you would lose (220.00) from holding Fubon MSCI Taiwan or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon MSCI Taiwan vs. China Metal Products
Performance |
| Timeline |
| Fubon MSCI Taiwan |
| China Metal Products |
Fubon MSCI and China Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon MSCI and China Metal
The main advantage of trading using opposite Fubon MSCI and China Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, China Metal 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 China Metal will offset losses from the drop in China Metal's long position.| Fubon MSCI vs. Fubon Hang Seng | Fubon MSCI vs. Fubon SP Preferred | Fubon MSCI vs. Fubon NASDAQ 100 1X | Fubon MSCI vs. Fubon TWSE Corporate |
| China Metal vs. Basso Industry Corp | China Metal vs. Chung Hsin Electric Machinery | China Metal vs. TYC Brother Industrial | China Metal vs. TECO Electric Machinery |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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