Correlation Between Cameo Communications and Formosan Rubber

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

By analyzing existing cross correlation between Cameo Communications and Formosan Rubber Group, you can compare the effects of market volatilities on Cameo Communications and Formosan Rubber 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 Cameo Communications with a short position of Formosan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cameo Communications and Formosan Rubber.

Diversification Opportunities for Cameo Communications and Formosan Rubber

-0.14

Correlation Coefficient

Cameo Communications  Formosan Rubber

Good diversification

The 3 months correlation between Cameo and Formosan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cameo Communications and Formosan Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosan Rubber Group and Cameo Communications 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 Cameo Communications are associated (or correlated) with Formosan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosan Rubber Group has no effect on the direction of Cameo Communications i.e., Cameo Communications and Formosan Rubber go up and down completely randomly.

Pair Corralation between Cameo Communications and Formosan Rubber

Assuming the 90 days trading horizon Cameo Communications is expected to generate 1.02 times less return on investment than Formosan Rubber. In addition to that, Cameo Communications is 5.6 times more volatile than Formosan Rubber Group. It trades about 0.03 of its total potential returns per unit of risk. Formosan Rubber Group is currently generating about 0.19 per unit of volatility. If you would invest  2,535  in Formosan Rubber Group on September 21, 2024 and sell it today you would earn a total of  65.00  from holding Formosan Rubber Group or generate 2.56% return on investment over 90 days.

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

Cameo Communications  vs.  Formosan Rubber Group

Cameo Communications

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cameo Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cameo Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Formosan Rubber Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formosan Rubber Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Formosan Rubber 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 Cameo Communications and Formosan Rubber

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

The idea behind Cameo Communications and Formosan Rubber Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.