Correlation Between Fubon MSCI and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and Compal Electronics 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 Compal Electronics 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 Compal Electronics, you can compare the effects of market volatilities on Fubon MSCI and Compal Electronics 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 Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and Compal Electronics.
Diversification Opportunities for Fubon MSCI and Compal Electronics
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fubon and Compal is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics 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 Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Compal Electronics go up and down completely randomly.
Pair Corralation between Fubon MSCI and Compal Electronics
Assuming the 90 days trading horizon Fubon MSCI is expected to generate 1.02 times less return on investment than Compal Electronics. But when comparing it to its historical volatility, Fubon MSCI Taiwan is 1.58 times less risky than Compal Electronics. It trades about 0.09 of its potential returns per unit of risk. Compal Electronics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,425 in Compal Electronics on November 19, 2024 and sell it today you would earn a total of 1,430 from holding Compal Electronics or generate 58.97% 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. Compal Electronics
Performance |
| Timeline |
| Fubon MSCI Taiwan |
| Compal Electronics |
Fubon MSCI and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon MSCI and Compal Electronics
The main advantage of trading using opposite Fubon MSCI and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, Compal Electronics 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 Compal Electronics will offset losses from the drop in Compal Electronics' 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 |
| Compal Electronics vs. Quanta Computer | Compal Electronics vs. Inventec Corp | Compal Electronics vs. Asustek Computer | Compal Electronics vs. Acer Inc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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