Correlation Between Formosa Laboratories and Panion BF

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

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

Diversification Opportunities for Formosa Laboratories and Panion BF

0.18

Correlation Coefficient

Formosa Laboratories  Panion BF

Average diversification

The 3 months correlation between Formosa and Panion is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Laboratories and Panion BF Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panion BF Biotech and Formosa Laboratories 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 Laboratories are associated (or correlated) with Panion BF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panion BF Biotech has no effect on the direction of Formosa Laboratories i.e., Formosa Laboratories and Panion BF go up and down completely randomly.

Pair Corralation between Formosa Laboratories and Panion BF

Assuming the 90 days trading horizon Formosa Laboratories is expected to under-perform the Panion BF. In addition to that, Formosa Laboratories is 1.48 times more volatile than Panion BF Biotech. It trades about -0.18 of its total potential returns per unit of risk. Panion BF Biotech is currently generating about -0.03 per unit of volatility. If you would invest  8,820  in Panion BF Biotech on September 14, 2024 and sell it today you would lose (260.00) from holding Panion BF Biotech or give up 2.95% of portfolio value over 90 days.

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

Formosa Laboratories  vs.  Panion BF Biotech

Formosa Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

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

Panion BF Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Formosa Laboratories and Panion BF

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

The idea behind Formosa Laboratories and Panion BF Biotech 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.