Correlation Between Formosa Chemicals and Quintain Steel
Can any of the company-specific risk be diversified away by investing in both Formosa Chemicals and Quintain Steel 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 Quintain Steel 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 Quintain Steel Co, you can compare the effects of market volatilities on Formosa Chemicals and Quintain Steel 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 Quintain Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Chemicals and Quintain Steel.
Diversification Opportunities for Formosa Chemicals and Quintain Steel
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Formosa and Quintain is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Chemicals Fibre and Quintain Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quintain Steel 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 Quintain Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quintain Steel has no effect on the direction of Formosa Chemicals i.e., Formosa Chemicals and Quintain Steel go up and down completely randomly.
Pair Corralation between Formosa Chemicals and Quintain Steel
Assuming the 90 days trading horizon Formosa Chemicals Fibre is expected to under-perform the Quintain Steel. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Chemicals Fibre is 1.34 times less risky than Quintain Steel. The stock trades about -0.13 of its potential returns per unit of risk. The Quintain Steel Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,357 in Quintain Steel Co on September 26, 2024 and sell it today you would lose (212.00) from holding Quintain Steel Co or give up 15.62% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 99.79% |
Values | Daily Returns |
Formosa Chemicals Fibre vs. Quintain Steel Co
Performance |
Timeline |
Formosa Chemicals Fibre |
Quintain Steel |
Formosa Chemicals and Quintain Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Chemicals and Quintain Steel
The main advantage of trading using opposite Formosa Chemicals and Quintain Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Chemicals position performs unexpectedly, Quintain Steel 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 Quintain Steel will offset losses from the drop in Quintain Steel's long position.Formosa Chemicals vs. China Steel Corp | Formosa Chemicals vs. Formosa Petrochemical Corp | Formosa Chemicals vs. Cathay Financial Holding |
Quintain Steel vs. Formosa Chemicals Fibre | Quintain Steel vs. China Steel Corp | Quintain Steel vs. Formosa Petrochemical Corp | Quintain Steel vs. Cathay Financial Holding |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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