Correlation Between Formosa International and Ingentec

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

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

Diversification Opportunities for Formosa International and Ingentec

0.89

Correlation Coefficient

Formosa International  Ingentec

Very poor diversification

The 3 months correlation between Formosa and Ingentec is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Formosa International Hotels and Ingentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingentec and Formosa International 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 International Hotels are associated (or correlated) with Ingentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingentec has no effect on the direction of Formosa International i.e., Formosa International and Ingentec go up and down completely randomly.

Pair Corralation between Formosa International and Ingentec

Assuming the 90 days trading horizon Formosa International Hotels is expected to under-perform the Ingentec. But the stock apears to be less risky and, when comparing its historical volatility, Formosa International Hotels is 1.6 times less risky than Ingentec. The stock trades about -0.02 of its potential returns per unit of risk. The Ingentec is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13,989  in Ingentec on October 4, 2024 and sell it today you would earn a total of  3,261  from holding Ingentec or generate 23.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Formosa International Hotels  vs.  Ingentec

Formosa International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formosa International Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Formosa International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Ingentec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ingentec 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Formosa International and Ingentec

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

The idea behind Formosa International Hotels and Ingentec 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.