Correlation Between Formosa Optical and Acelon Chemicals
Can any of the company-specific risk be diversified away by investing in both Formosa Optical and Acelon Chemicals 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 Optical and Acelon Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Optical Technology and Acelon Chemicals Fiber, you can compare the effects of market volatilities on Formosa Optical and Acelon Chemicals 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 Optical with a short position of Acelon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Optical and Acelon Chemicals.
Diversification Opportunities for Formosa Optical and Acelon Chemicals
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosa and Acelon is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Optical Technology and Acelon Chemicals Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acelon Chemicals Fiber and Formosa Optical 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 Optical Technology are associated (or correlated) with Acelon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acelon Chemicals Fiber has no effect on the direction of Formosa Optical i.e., Formosa Optical and Acelon Chemicals go up and down completely randomly.
Pair Corralation between Formosa Optical and Acelon Chemicals
Assuming the 90 days trading horizon Formosa Optical Technology is expected to generate 0.35 times more return on investment than Acelon Chemicals. However, Formosa Optical Technology is 2.87 times less risky than Acelon Chemicals. It trades about 0.14 of its potential returns per unit of risk. Acelon Chemicals Fiber is currently generating about -0.04 per unit of risk. If you would invest 10,200 in Formosa Optical Technology on October 25, 2024 and sell it today you would earn a total of 900.00 from holding Formosa Optical Technology or generate 8.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Formosa Optical Technology vs. Acelon Chemicals Fiber
Performance |
Timeline |
Formosa Optical Tech |
Acelon Chemicals Fiber |
Formosa Optical and Acelon Chemicals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Optical and Acelon Chemicals
The main advantage of trading using opposite Formosa Optical and Acelon Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Optical position performs unexpectedly, Acelon Chemicals 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 Acelon Chemicals will offset losses from the drop in Acelon Chemicals' long position.Formosa Optical vs. Quintain Steel Co | Formosa Optical vs. Tung Ho Steel | Formosa Optical vs. GeneFerm Biotechnology Co | Formosa Optical vs. Genovate Biotechnology Co |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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