Correlation Between Sunfon Construction and Formosa Plastics
Can any of the company-specific risk be diversified away by investing in both Sunfon Construction and Formosa Plastics 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 Sunfon Construction and Formosa Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunfon Construction Co and Formosa Plastics Corp, you can compare the effects of market volatilities on Sunfon Construction and Formosa Plastics 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 Sunfon Construction with a short position of Formosa Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunfon Construction and Formosa Plastics.
Diversification Opportunities for Sunfon Construction and Formosa Plastics
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sunfon and Formosa is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sunfon Construction Co and Formosa Plastics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Plastics Corp and Sunfon Construction 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 Sunfon Construction Co are associated (or correlated) with Formosa Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Plastics Corp has no effect on the direction of Sunfon Construction i.e., Sunfon Construction and Formosa Plastics go up and down completely randomly.
Pair Corralation between Sunfon Construction and Formosa Plastics
Assuming the 90 days trading horizon Sunfon Construction Co is expected to generate 0.55 times more return on investment than Formosa Plastics. However, Sunfon Construction Co is 1.81 times less risky than Formosa Plastics. It trades about -0.2 of its potential returns per unit of risk. Formosa Plastics Corp is currently generating about -0.42 per unit of risk. If you would invest 2,060 in Sunfon Construction Co on September 25, 2024 and sell it today you would lose (85.00) from holding Sunfon Construction Co or give up 4.13% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Sunfon Construction Co vs. Formosa Plastics Corp
Performance |
Timeline |
Sunfon Construction |
Formosa Plastics Corp |
Sunfon Construction and Formosa Plastics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sunfon Construction and Formosa Plastics
The main advantage of trading using opposite Sunfon Construction and Formosa Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunfon Construction position performs unexpectedly, Formosa Plastics 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 Formosa Plastics will offset losses from the drop in Formosa Plastics' long position.Sunfon Construction vs. Formosa Plastics Corp | Sunfon Construction vs. Sports Gear Co | Sunfon Construction vs. Lihtai Construction Enterprise | Sunfon Construction vs. Shinkong Insurance 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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