Correlation Between MPI and Fubon Taiwan

Can any of the company-specific risk be diversified away by investing in both MPI and Fubon Taiwan 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 MPI and Fubon Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MPI Corporation and Fubon Taiwan Technology, you can compare the effects of market volatilities on MPI and Fubon Taiwan 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 MPI with a short position of Fubon Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPI and Fubon Taiwan.

Diversification Opportunities for MPI and Fubon Taiwan

0.66

Correlation Coefficient

MPI  Fubon Taiwan

Poor diversification

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

Pair Corralation between MPI and Fubon Taiwan

Assuming the 90 days trading horizon MPI Corporation is expected to generate 2.08 times more return on investment than Fubon Taiwan. However, MPI is 2.08 times more volatile than Fubon Taiwan Technology. It trades about 0.03 of its potential returns per unit of risk. Fubon Taiwan Technology is currently generating about 0.05 per unit of risk. If you would invest  75,300  in MPI Corporation on September 2, 2024 and sell it today you would earn a total of  2,700  from holding MPI Corporation or generate 3.59% return on investment over 90 days.

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

MPI Corp.  vs.  Fubon Taiwan Technology

MPI Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MPI Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, MPI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fubon Taiwan Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Taiwan Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Fubon Taiwan 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 MPI and Fubon Taiwan

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

The idea behind MPI Corporation and Fubon Taiwan Technology 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 Valuation module to check real value of public entities based on technical and fundamental data.