Correlation Between Formosa Laboratories and Wellell

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

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

Diversification Opportunities for Formosa Laboratories and Wellell

0.82

Correlation Coefficient

Formosa Laboratories  Wellell

Very poor diversification

The 3 months correlation between Formosa and Wellell is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Laboratories and Wellell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wellell 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 Wellell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wellell has no effect on the direction of Formosa Laboratories i.e., Formosa Laboratories and Wellell go up and down completely randomly.

Pair Corralation between Formosa Laboratories and Wellell

If you would invest  0.00  in Wellell on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Wellell or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.35%
Values	Daily Returns

Formosa Laboratories  vs.  Wellell

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.

Wellell

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Formosa Laboratories and Wellell

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

The idea behind Formosa Laboratories and Wellell 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.