Correlation Between Sigurd Microelectronics and Formosa Advanced

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

By analyzing existing cross correlation between Sigurd Microelectronics Corp and Formosa Advanced Technologies, you can compare the effects of market volatilities on Sigurd Microelectronics and Formosa Advanced 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 Sigurd Microelectronics with a short position of Formosa Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigurd Microelectronics and Formosa Advanced.

Diversification Opportunities for Sigurd Microelectronics and Formosa Advanced

0.85

Correlation Coefficient

Sigurd Microelectronics  Formosa Advanced

Very poor diversification

The 3 months correlation between Sigurd and Formosa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sigurd Microelectronics Corp and Formosa Advanced Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Advanced Tec and Sigurd Microelectronics 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 Sigurd Microelectronics Corp are associated (or correlated) with Formosa Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Advanced Tec has no effect on the direction of Sigurd Microelectronics i.e., Sigurd Microelectronics and Formosa Advanced go up and down completely randomly.

Pair Corralation between Sigurd Microelectronics and Formosa Advanced

Assuming the 90 days trading horizon Sigurd Microelectronics Corp is expected to generate 1.22 times more return on investment than Formosa Advanced. However, Sigurd Microelectronics is 1.22 times more volatile than Formosa Advanced Technologies. It trades about 0.15 of its potential returns per unit of risk. Formosa Advanced Technologies is currently generating about 0.06 per unit of risk. If you would invest  6,800  in Sigurd Microelectronics Corp on December 30, 2024 and sell it today you would earn a total of  950.00  from holding Sigurd Microelectronics Corp or generate 13.97% return on investment over 90 days.

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

Sigurd Microelectronics Corp  vs.  Formosa Advanced Technologies

Sigurd Microelectronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sigurd Microelectronics Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sigurd Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Formosa Advanced Tec

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formosa Advanced Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Formosa Advanced 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 Sigurd Microelectronics and Formosa Advanced

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

The idea behind Sigurd Microelectronics Corp and Formosa Advanced Technologies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.