Correlation Between Formosa Sumco and Phoenix Silicon
Can any of the company-specific risk be diversified away by investing in both Formosa Sumco and Phoenix Silicon 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 Sumco and Phoenix Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Sumco Technology and Phoenix Silicon International, you can compare the effects of market volatilities on Formosa Sumco and Phoenix Silicon 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 Sumco with a short position of Phoenix Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Sumco and Phoenix Silicon.
Diversification Opportunities for Formosa Sumco and Phoenix Silicon
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosa and Phoenix is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Sumco Technology and Phoenix Silicon International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Silicon Inte and Formosa Sumco 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 Sumco Technology are associated (or correlated) with Phoenix Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Silicon Inte has no effect on the direction of Formosa Sumco i.e., Formosa Sumco and Phoenix Silicon go up and down completely randomly.
Pair Corralation between Formosa Sumco and Phoenix Silicon
Assuming the 90 days trading horizon Formosa Sumco Technology is expected to under-perform the Phoenix Silicon. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Sumco Technology is 1.68 times less risky than Phoenix Silicon. The stock trades about -0.05 of its potential returns per unit of risk. The Phoenix Silicon International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 5,025 in Phoenix Silicon International on September 14, 2024 and sell it today you would earn a total of 7,925 from holding Phoenix Silicon International or generate 157.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Formosa Sumco Technology vs. Phoenix Silicon International
Performance |
Timeline |
Formosa Sumco Technology |
Phoenix Silicon Inte |
Formosa Sumco and Phoenix Silicon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Sumco and Phoenix Silicon
The main advantage of trading using opposite Formosa Sumco and Phoenix Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Sumco position performs unexpectedly, Phoenix Silicon 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 Phoenix Silicon will offset losses from the drop in Phoenix Silicon's long position.Formosa Sumco vs. AU Optronics | Formosa Sumco vs. Innolux Corp | Formosa Sumco vs. Ruentex Development Co | Formosa Sumco vs. WiseChip Semiconductor |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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