Correlation Between Choice Development and Fubon MSCI

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

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

Diversification Opportunities for Choice Development and Fubon MSCI

-0.52

Correlation Coefficient

Choice Development  Fubon MSCI

Excellent diversification

The 3 months correlation between Choice and Fubon is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Choice Development 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 Choice Development 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 Choice Development 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 Choice Development i.e., Choice Development and Fubon MSCI go up and down completely randomly.

Pair Corralation between Choice Development and Fubon MSCI

Assuming the 90 days trading horizon Choice Development is expected to under-perform the Fubon MSCI. In addition to that, Choice Development is 1.24 times more volatile than Fubon MSCI Taiwan. It trades about -0.03 of its total potential returns per unit of risk. Fubon MSCI Taiwan is currently generating about 0.1 per unit of volatility. If you would invest  13,185  in Fubon MSCI Taiwan on September 12, 2024 and sell it today you would earn a total of  990.00  from holding Fubon MSCI Taiwan or generate 7.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Choice Development  vs.  Fubon MSCI Taiwan

Choice Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Choice Development and Fubon MSCI

The main advantage of trading using opposite Choice Development and Fubon MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Development 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 Choice Development 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.