Correlation Between Fubon MSCI and GeneFerm Biotechnology

Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and GeneFerm Biotechnology 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 GeneFerm Biotechnology 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 GeneFerm Biotechnology Co, you can compare the effects of market volatilities on Fubon MSCI and GeneFerm Biotechnology 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 GeneFerm Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and GeneFerm Biotechnology.

Diversification Opportunities for Fubon MSCI and GeneFerm Biotechnology

0.66

Correlation Coefficient

Fubon MSCI  GeneFerm Biotechnology

Poor diversification

The 3 months correlation between Fubon and GeneFerm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and GeneFerm Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeneFerm Biotechnology 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 GeneFerm Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeneFerm Biotechnology has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and GeneFerm Biotechnology go up and down completely randomly.

Pair Corralation between Fubon MSCI and GeneFerm Biotechnology

Assuming the 90 days trading horizon Fubon MSCI is expected to generate 1.19 times less return on investment than GeneFerm Biotechnology. But when comparing it to its historical volatility, Fubon MSCI Taiwan is 1.32 times less risky than GeneFerm Biotechnology. It trades about 0.04 of its potential returns per unit of risk. GeneFerm Biotechnology Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,845  in GeneFerm Biotechnology Co on September 1, 2024 and sell it today you would earn a total of  150.00  from holding GeneFerm Biotechnology Co or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fubon MSCI Taiwan  vs.  GeneFerm Biotechnology Co

Fubon MSCI Taiwan

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fubon MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

GeneFerm Biotechnology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GeneFerm Biotechnology Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, GeneFerm Biotechnology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fubon MSCI and GeneFerm Biotechnology

The main advantage of trading using opposite Fubon MSCI and GeneFerm Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, GeneFerm Biotechnology 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 GeneFerm Biotechnology will offset losses from the drop in GeneFerm Biotechnology's long position.

The idea behind Fubon MSCI Taiwan and GeneFerm Biotechnology 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.