Correlation Between Formosan Rubber and Sung Gang

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

By analyzing existing cross correlation between Formosan Rubber Group and Sung Gang Asset, you can compare the effects of market volatilities on Formosan Rubber and Sung Gang 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 Formosan Rubber with a short position of Sung Gang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and Sung Gang.

Diversification Opportunities for Formosan Rubber and Sung Gang

0.54

Correlation Coefficient

Formosan Rubber  Sung Gang

Very weak diversification

The 3 months correlation between Formosan and Sung is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group and Sung Gang Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sung Gang Asset and Formosan Rubber 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 Formosan Rubber Group are associated (or correlated) with Sung Gang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sung Gang Asset has no effect on the direction of Formosan Rubber i.e., Formosan Rubber and Sung Gang go up and down completely randomly.

Pair Corralation between Formosan Rubber and Sung Gang

Assuming the 90 days trading horizon Formosan Rubber is expected to generate 6.0 times less return on investment than Sung Gang. But when comparing it to its historical volatility, Formosan Rubber Group is 2.44 times less risky than Sung Gang. It trades about 0.05 of its potential returns per unit of risk. Sung Gang Asset is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,035  in Sung Gang Asset on December 23, 2024 and sell it today you would earn a total of  195.00  from holding Sung Gang Asset or generate 9.58% return on investment over 90 days.

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

Formosan Rubber Group  vs.  Sung Gang Asset

Formosan Rubber Group

Risk-Adjusted Performance

Insignificant

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

Sung Gang Asset

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sung Gang Asset are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sung Gang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Formosan Rubber and Sung Gang

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

The idea behind Formosan Rubber Group and Sung Gang Asset 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.