Correlation Between Fubon TWSE and YuantaP Shares
Can any of the company-specific risk be diversified away by investing in both Fubon TWSE and YuantaP Shares 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 TWSE and YuantaP Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon TWSE Corporate and YuantaP shares MSCI Taiwan, you can compare the effects of market volatilities on Fubon TWSE and YuantaP Shares 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 TWSE with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon TWSE and YuantaP Shares.
Diversification Opportunities for Fubon TWSE and YuantaP Shares
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fubon and YuantaP is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fubon TWSE Corporate and YuantaP shares MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares MSCI and Fubon TWSE 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 TWSE Corporate are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares MSCI has no effect on the direction of Fubon TWSE i.e., Fubon TWSE and YuantaP Shares go up and down completely randomly.
Pair Corralation between Fubon TWSE and YuantaP Shares
Assuming the 90 days trading horizon Fubon TWSE Corporate is expected to generate 1.38 times more return on investment than YuantaP Shares. However, Fubon TWSE is 1.38 times more volatile than YuantaP shares MSCI Taiwan. It trades about 0.1 of its potential returns per unit of risk. YuantaP shares MSCI Taiwan is currently generating about 0.08 per unit of risk. If you would invest 3,441 in Fubon TWSE Corporate on November 3, 2024 and sell it today you would earn a total of 1,204 from holding Fubon TWSE Corporate or generate 34.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon TWSE Corporate vs. YuantaP shares MSCI Taiwan
Performance |
| Timeline |
| Fubon TWSE Corporate |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| YuantaP shares MSCI |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fubon TWSE and YuantaP Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon TWSE and YuantaP Shares
The main advantage of trading using opposite Fubon TWSE and YuantaP Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon TWSE position performs unexpectedly, YuantaP Shares 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 YuantaP Shares will offset losses from the drop in YuantaP Shares' long position.The idea behind Fubon TWSE Corporate and YuantaP shares MSCI Taiwan 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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