Correlation Between Interactive Digital and Fubon MSCI

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

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

Diversification Opportunities for Interactive Digital and Fubon MSCI

0.76

Correlation Coefficient

Interactive Digital  Fubon MSCI

Poor diversification

The 3 months correlation between Interactive and Fubon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Interactive Digital Technologi and Fubon MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon MSCI Taiwan and Interactive Digital 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 Interactive Digital Technologies are associated (or correlated) with Fubon MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon MSCI Taiwan has no effect on the direction of Interactive Digital i.e., Interactive Digital and Fubon MSCI go up and down completely randomly.

Pair Corralation between Interactive Digital and Fubon MSCI

Assuming the 90 days trading horizon Interactive Digital is expected to generate 3.02 times less return on investment than Fubon MSCI. But when comparing it to its historical volatility, Interactive Digital Technologies is 1.13 times less risky than Fubon MSCI. It trades about 0.04 of its potential returns per unit of risk. Fubon MSCI Taiwan is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,185  in Fubon MSCI Taiwan on September 12, 2024 and sell it today you would earn a total of  1,150  from holding Fubon MSCI Taiwan or generate 8.72% return on investment over 90 days.

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

Interactive Digital Technologi  vs.  Fubon MSCI Taiwan

Interactive Digital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Digital Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Interactive Digital is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Fubon MSCI Taiwan

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 9 (%) 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.

Pair Trading with Interactive Digital and Fubon MSCI

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

The idea behind Interactive Digital Technologies and Fubon MSCI Taiwan 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.