Correlation Between Fubon MSCI and Fittech

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

Diversification Opportunities for Fubon MSCI and Fittech

0.7

Correlation Coefficient

Fubon MSCI  Fittech

Poor diversification

The 3 months correlation between Fubon and Fittech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Fittech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fittech 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 Fittech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fittech has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Fittech go up and down completely randomly.

Pair Corralation between Fubon MSCI and Fittech

Assuming the 90 days trading horizon Fubon MSCI is expected to generate 4.76 times less return on investment than Fittech. But when comparing it to its historical volatility, Fubon MSCI Taiwan is 2.91 times less risky than Fittech. It trades about 0.04 of its potential returns per unit of risk. Fittech Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  13,300  in Fittech Co on August 31, 2024 and sell it today you would earn a total of  1,400  from holding Fittech Co or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Fubon MSCI Taiwan  vs.  Fittech Co

Fubon MSCI Taiwan

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 2 (%) 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.

Fittech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fittech Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fittech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon MSCI and Fittech

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

The idea behind Fubon MSCI Taiwan and Fittech 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.