Correlation Between King Yuan and Formosa Advanced

Can any of the company-specific risk be diversified away by investing in both King Yuan and Formosa Advanced 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 King Yuan and Formosa Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between King Yuan Electronics and Formosa Advanced Technologies, you can compare the effects of market volatilities on King Yuan and Formosa Advanced 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 King Yuan with a short position of Formosa Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Yuan and Formosa Advanced.

Diversification Opportunities for King Yuan and Formosa Advanced

-0.59

Correlation Coefficient

King Yuan  Formosa Advanced

Excellent diversification

The 3 months correlation between King and Formosa is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding King Yuan Electronics and Formosa Advanced Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Advanced Tec and King Yuan 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 King Yuan Electronics are associated (or correlated) with Formosa Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Advanced Tec has no effect on the direction of King Yuan i.e., King Yuan and Formosa Advanced go up and down completely randomly.

Pair Corralation between King Yuan and Formosa Advanced

Assuming the 90 days trading horizon King Yuan Electronics is expected to under-perform the Formosa Advanced. In addition to that, King Yuan is 1.99 times more volatile than Formosa Advanced Technologies. It trades about -0.11 of its total potential returns per unit of risk. Formosa Advanced Technologies is currently generating about 0.08 per unit of volatility. If you would invest  2,865  in Formosa Advanced Technologies on December 27, 2024 and sell it today you would earn a total of  155.00  from holding Formosa Advanced Technologies or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

King Yuan Electronics  vs.  Formosa Advanced Technologies

King Yuan Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days King Yuan Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Formosa Advanced Tec

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Formosa Advanced Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Formosa Advanced may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with King Yuan and Formosa Advanced

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

The idea behind King Yuan Electronics and Formosa Advanced Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.