Correlation Between Fubon MSCI and Taiwan Paiho
Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and Taiwan Paiho 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 Taiwan Paiho 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 Taiwan Paiho, you can compare the effects of market volatilities on Fubon MSCI and Taiwan Paiho 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 Taiwan Paiho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and Taiwan Paiho.
Diversification Opportunities for Fubon MSCI and Taiwan Paiho
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fubon and Taiwan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Taiwan Paiho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Paiho 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 Taiwan Paiho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Paiho has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Taiwan Paiho go up and down completely randomly.
Pair Corralation between Fubon MSCI and Taiwan Paiho
Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Taiwan Paiho. But the etf apears to be less risky and, when comparing its historical volatility, Fubon MSCI Taiwan is 1.08 times less risky than Taiwan Paiho. The etf trades about -0.11 of its potential returns per unit of risk. The Taiwan Paiho is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 8,140 in Taiwan Paiho on August 29, 2024 and sell it today you would lose (190.00) from holding Taiwan Paiho or give up 2.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon MSCI Taiwan vs. Taiwan Paiho
Performance |
| Timeline |
| Fubon MSCI Taiwan |
| Taiwan Paiho |
Fubon MSCI and Taiwan Paiho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon MSCI and Taiwan Paiho
The main advantage of trading using opposite Fubon MSCI and Taiwan Paiho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, Taiwan Paiho 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 Taiwan Paiho will offset losses from the drop in Taiwan Paiho's long position.The idea behind Fubon MSCI Taiwan and Taiwan Paiho 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.| Taiwan Paiho vs. Taiwan Semiconductor Manufacturing | Taiwan Paiho vs. Hon Hai Precision | Taiwan Paiho vs. MediaTek | Taiwan Paiho vs. Chunghwa Telecom Co |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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