Correlation Between Fubon MSCI and Sporton International

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

Diversification Opportunities for Fubon MSCI and Sporton International

-0.26

Correlation Coefficient

Fubon MSCI  Sporton International

Very good diversification

The 3 months correlation between Fubon and Sporton is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Sporton International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporton International 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 Sporton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporton International has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Sporton International go up and down completely randomly.

Pair Corralation between Fubon MSCI and Sporton International

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to generate 1.0 times more return on investment than Sporton International. However, Fubon MSCI is 1.0 times more volatile than Sporton International. It trades about -0.1 of its potential returns per unit of risk. Sporton International is currently generating about -0.16 per unit of risk. If you would invest  14,550  in Fubon MSCI Taiwan on September 12, 2024 and sell it today you would lose (375.00) from holding Fubon MSCI Taiwan or give up 2.58% 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.  Sporton International

Fubon MSCI Taiwan

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fubon MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sporton International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sporton International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sporton International 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 Sporton International

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

The idea behind Fubon MSCI Taiwan and Sporton International 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.