Correlation Between Formosa Oilseed and Shin Tai
Can any of the company-specific risk be diversified away by investing in both Formosa Oilseed and Shin Tai 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 Formosa Oilseed and Shin Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Oilseed Processing and Shin Tai Industry, you can compare the effects of market volatilities on Formosa Oilseed and Shin Tai 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 Formosa Oilseed with a short position of Shin Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Oilseed and Shin Tai.
Diversification Opportunities for Formosa Oilseed and Shin Tai
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Formosa and Shin is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Oilseed Processing and Shin Tai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Tai Industry and Formosa Oilseed 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 Formosa Oilseed Processing are associated (or correlated) with Shin Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Tai Industry has no effect on the direction of Formosa Oilseed i.e., Formosa Oilseed and Shin Tai go up and down completely randomly.
Pair Corralation between Formosa Oilseed and Shin Tai
Assuming the 90 days trading horizon Formosa Oilseed Processing is expected to generate 1.4 times more return on investment than Shin Tai. However, Formosa Oilseed is 1.4 times more volatile than Shin Tai Industry. It trades about 0.0 of its potential returns per unit of risk. Shin Tai Industry is currently generating about -0.01 per unit of risk. If you would invest 5,380 in Formosa Oilseed Processing on October 21, 2024 and sell it today you would lose (830.00) from holding Formosa Oilseed Processing or give up 15.43% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Formosa Oilseed Processing vs. Shin Tai Industry
Performance |
Timeline |
Formosa Oilseed Proc |
Shin Tai Industry |
Formosa Oilseed and Shin Tai Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Oilseed and Shin Tai
The main advantage of trading using opposite Formosa Oilseed and Shin Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Oilseed position performs unexpectedly, Shin Tai 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 Shin Tai will offset losses from the drop in Shin Tai's long position.Formosa Oilseed vs. Great Wall Enterprise | Formosa Oilseed vs. Lian Hwa Foods | Formosa Oilseed vs. Lien Hwa Industrial | Formosa Oilseed vs. Charoen Pokphand Enterprise |
Shin Tai vs. Fwusow Industry Co | Shin Tai vs. TTET Union Corp | Shin Tai vs. Lian Hwa Foods | Shin Tai vs. Formosa Oilseed Processing |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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