Correlation Between Formosa Chemicals and Shiny Chemical
Can any of the company-specific risk be diversified away by investing in both Formosa Chemicals and Shiny Chemical 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 Formosa Chemicals and Shiny Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Chemicals Fibre and Shiny Chemical Industrial, you can compare the effects of market volatilities on Formosa Chemicals and Shiny Chemical 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 Formosa Chemicals with a short position of Shiny Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Chemicals and Shiny Chemical.
Diversification Opportunities for Formosa Chemicals and Shiny Chemical
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formosa and Shiny is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Chemicals Fibre and Shiny Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiny Chemical Industrial and Formosa Chemicals 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 Formosa Chemicals Fibre are associated (or correlated) with Shiny Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiny Chemical Industrial has no effect on the direction of Formosa Chemicals i.e., Formosa Chemicals and Shiny Chemical go up and down completely randomly.
Pair Corralation between Formosa Chemicals and Shiny Chemical
Assuming the 90 days trading horizon Formosa Chemicals Fibre is expected to under-perform the Shiny Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Chemicals Fibre is 1.4 times less risky than Shiny Chemical. The stock trades about -0.13 of its potential returns per unit of risk. The Shiny Chemical Industrial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 11,550 in Shiny Chemical Industrial on September 24, 2024 and sell it today you would earn a total of 4,200 from holding Shiny Chemical Industrial or generate 36.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Formosa Chemicals Fibre vs. Shiny Chemical Industrial
Performance |
Timeline |
Formosa Chemicals Fibre |
Shiny Chemical Industrial |
Formosa Chemicals and Shiny Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Chemicals and Shiny Chemical
The main advantage of trading using opposite Formosa Chemicals and Shiny Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Chemicals position performs unexpectedly, Shiny Chemical 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 Shiny Chemical will offset losses from the drop in Shiny Chemical's long position.Formosa Chemicals vs. Formosa Plastics Corp | Formosa Chemicals vs. Nan Ya Plastics | Formosa Chemicals vs. Formosa Petrochemical Corp | Formosa Chemicals vs. Cathay Financial Holding |
Shiny Chemical vs. Formosa Plastics Corp | Shiny Chemical vs. Formosa Chemicals Fibre | Shiny Chemical vs. China Steel Corp | Shiny Chemical vs. Formosa Petrochemical Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |