Correlation Between Fubon MSCI and Gem Terminal

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

Diversification Opportunities for Fubon MSCI and Gem Terminal

-0.35

Correlation Coefficient

Fubon MSCI  Gem Terminal

Very good diversification

The 3 months correlation between Fubon and Gem is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Gem Terminal Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gem Terminal Industry 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 Gem Terminal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gem Terminal Industry has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Gem Terminal go up and down completely randomly.

Pair Corralation between Fubon MSCI and Gem Terminal

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 0.59 times more return on investment than Gem Terminal. However, Fubon MSCI Taiwan is 1.7 times less risky than Gem Terminal. It trades about -0.02 of its potential returns per unit of risk. Gem Terminal Industry is currently generating about -0.27 per unit of risk. If you would invest  14,175  in Fubon MSCI Taiwan on September 23, 2024 and sell it today you would lose (85.00) from holding Fubon MSCI Taiwan or give up 0.6% of portfolio value over 90 days.

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

Fubon MSCI Taiwan  vs.  Gem Terminal Industry

Fubon MSCI Taiwan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 4 (%) 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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gem Terminal Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gem Terminal Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Fubon MSCI and Gem Terminal

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

The idea behind Fubon MSCI Taiwan and Gem Terminal Industry 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.