Correlation Between Sports Gear and Formosa International
Can any of the company-specific risk be diversified away by investing in both Sports Gear and Formosa International 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 Sports Gear and Formosa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sports Gear Co and Formosa International Hotels, you can compare the effects of market volatilities on Sports Gear and Formosa International 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 Sports Gear with a short position of Formosa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Gear and Formosa International.
Diversification Opportunities for Sports Gear and Formosa International
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sports and Formosa is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Formosa International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa International and Sports Gear 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 Sports Gear Co are associated (or correlated) with Formosa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa International has no effect on the direction of Sports Gear i.e., Sports Gear and Formosa International go up and down completely randomly.
Pair Corralation between Sports Gear and Formosa International
Assuming the 90 days trading horizon Sports Gear Co is expected to generate 3.99 times more return on investment than Formosa International. However, Sports Gear is 3.99 times more volatile than Formosa International Hotels. It trades about 0.08 of its potential returns per unit of risk. Formosa International Hotels is currently generating about -0.09 per unit of risk. If you would invest 10,650 in Sports Gear Co on September 26, 2024 and sell it today you would earn a total of 1,600 from holding Sports Gear Co or generate 15.02% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Sports Gear Co vs. Formosa International Hotels
Performance |
Timeline |
Sports Gear |
Formosa International |
Sports Gear and Formosa International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sports Gear and Formosa International
The main advantage of trading using opposite Sports Gear and Formosa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sports Gear position performs unexpectedly, Formosa International 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 International will offset losses from the drop in Formosa International's long position.Sports Gear vs. Feng Tay Enterprises | Sports Gear vs. Pou Chen Corp | Sports Gear vs. Fulgent Sun International | Sports Gear vs. Advanced Energy Solution |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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