Correlation Between Chia Hsin and Formosa Petrochemical
Can any of the company-specific risk be diversified away by investing in both Chia Hsin and Formosa Petrochemical 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 Chia Hsin and Formosa Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chia Hsin Cement and Formosa Petrochemical Corp, you can compare the effects of market volatilities on Chia Hsin and Formosa Petrochemical 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 Chia Hsin with a short position of Formosa Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Hsin and Formosa Petrochemical.
Diversification Opportunities for Chia Hsin and Formosa Petrochemical
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Chia and Formosa is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chia Hsin Cement and Formosa Petrochemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Petrochemical and Chia Hsin 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 Chia Hsin Cement are associated (or correlated) with Formosa Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Petrochemical has no effect on the direction of Chia Hsin i.e., Chia Hsin and Formosa Petrochemical go up and down completely randomly.
Pair Corralation between Chia Hsin and Formosa Petrochemical
Assuming the 90 days trading horizon Chia Hsin Cement is expected to generate 0.9 times more return on investment than Formosa Petrochemical. However, Chia Hsin Cement is 1.11 times less risky than Formosa Petrochemical. It trades about 0.01 of its potential returns per unit of risk. Formosa Petrochemical Corp is currently generating about -0.11 per unit of risk. If you would invest 1,745 in Chia Hsin Cement on September 4, 2024 and sell it today you would earn a total of 45.00 from holding Chia Hsin Cement or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Chia Hsin Cement vs. Formosa Petrochemical Corp
Performance |
| Timeline |
| Chia Hsin Cement |
| Formosa Petrochemical |
Chia Hsin and Formosa Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chia Hsin and Formosa Petrochemical
The main advantage of trading using opposite Chia Hsin and Formosa Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Hsin position performs unexpectedly, Formosa Petrochemical 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 Petrochemical will offset losses from the drop in Formosa Petrochemical's long position.| Chia Hsin vs. Universal Cement Corp | Chia Hsin vs. Hsing Ta Cement | Chia Hsin vs. USI Corp | Chia Hsin vs. Asia Polymer Corp |
| Formosa Petrochemical vs. Quintain Steel Co | Formosa Petrochemical vs. Tung Ho Steel | Formosa Petrochemical vs. Sunny Friend Environmental | Formosa Petrochemical vs. Iron Force Industrial |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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