Correlation Between Fubon MSCI and Paiho Shih

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

Diversification Opportunities for Fubon MSCI and Paiho Shih

0.85

Correlation Coefficient

Fubon MSCI  Paiho Shih

Very poor diversification

The 3 months correlation between Fubon and Paiho is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Paiho Shih Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paiho Shih Holdings 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 Paiho Shih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paiho Shih Holdings has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Paiho Shih go up and down completely randomly.

Pair Corralation between Fubon MSCI and Paiho Shih

Assuming the 90 days trading horizon Fubon MSCI is expected to generate 14.39 times less return on investment than Paiho Shih. But when comparing it to its historical volatility, Fubon MSCI Taiwan is 2.69 times less risky than Paiho Shih. It trades about 0.04 of its potential returns per unit of risk. Paiho Shih Holdings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,780  in Paiho Shih Holdings on September 3, 2024 and sell it today you would earn a total of  1,195  from holding Paiho Shih Holdings or generate 67.13% return on investment over 90 days.

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

Fubon MSCI Taiwan  vs.  Paiho Shih Holdings

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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Paiho Shih Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Paiho Shih Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Paiho Shih showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon MSCI and Paiho Shih

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

The idea behind Fubon MSCI Taiwan and Paiho Shih Holdings 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.