Correlation Between Fubon MSCI and Sinphar Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and Sinphar Pharmaceutical 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 Sinphar Pharmaceutical 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 Sinphar Pharmaceutical Co, you can compare the effects of market volatilities on Fubon MSCI and Sinphar Pharmaceutical 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 Sinphar Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and Sinphar Pharmaceutical.
Diversification Opportunities for Fubon MSCI and Sinphar Pharmaceutical
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fubon and Sinphar is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Sinphar Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinphar Pharmaceutical 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 Sinphar Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinphar Pharmaceutical has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Sinphar Pharmaceutical go up and down completely randomly.
Pair Corralation between Fubon MSCI and Sinphar Pharmaceutical
Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 0.94 times more return on investment than Sinphar Pharmaceutical. However, Fubon MSCI Taiwan is 1.06 times less risky than Sinphar Pharmaceutical. It trades about 0.1 of its potential returns per unit of risk. Sinphar Pharmaceutical Co is currently generating about -0.01 per unit of risk. If you would invest 8,610 in Fubon MSCI Taiwan on August 29, 2024 and sell it today you would earn a total of 5,360 from holding Fubon MSCI Taiwan or generate 62.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon MSCI Taiwan vs. Sinphar Pharmaceutical Co
Performance |
| Timeline |
| Fubon MSCI Taiwan |
| Sinphar Pharmaceutical |
Fubon MSCI and Sinphar Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon MSCI and Sinphar Pharmaceutical
The main advantage of trading using opposite Fubon MSCI and Sinphar Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, Sinphar Pharmaceutical 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 Sinphar Pharmaceutical will offset losses from the drop in Sinphar Pharmaceutical's long position.The idea behind Fubon MSCI Taiwan and Sinphar Pharmaceutical 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.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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