Correlation Between Formosa Plastics and Taiwan Mobile
Can any of the company-specific risk be diversified away by investing in both Formosa Plastics and Taiwan Mobile 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 Plastics and Taiwan Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Plastics Corp and Taiwan Mobile Co, you can compare the effects of market volatilities on Formosa Plastics and Taiwan Mobile 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 Plastics with a short position of Taiwan Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Plastics and Taiwan Mobile.
Diversification Opportunities for Formosa Plastics and Taiwan Mobile
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Formosa and Taiwan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Plastics Corp and Taiwan Mobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Mobile and Formosa Plastics 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 Plastics Corp are associated (or correlated) with Taiwan Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Mobile has no effect on the direction of Formosa Plastics i.e., Formosa Plastics and Taiwan Mobile go up and down completely randomly.
Pair Corralation between Formosa Plastics and Taiwan Mobile
Assuming the 90 days trading horizon Formosa Plastics Corp is expected to under-perform the Taiwan Mobile. In addition to that, Formosa Plastics is 1.97 times more volatile than Taiwan Mobile Co. It trades about -0.2 of its total potential returns per unit of risk. Taiwan Mobile Co is currently generating about 0.08 per unit of volatility. If you would invest 11,300 in Taiwan Mobile Co on August 28, 2024 and sell it today you would earn a total of 200.00 from holding Taiwan Mobile Co or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Formosa Plastics Corp vs. Taiwan Mobile Co
Performance |
| Timeline |
| Formosa Plastics Corp |
| Taiwan Mobile |
Formosa Plastics and Taiwan Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Plastics and Taiwan Mobile
The main advantage of trading using opposite Formosa Plastics and Taiwan Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Plastics position performs unexpectedly, Taiwan Mobile 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 Taiwan Mobile will offset losses from the drop in Taiwan Mobile's long position.| Formosa Plastics vs. Cheng Shin Rubber | Formosa Plastics vs. China Steel Chemical | Formosa Plastics vs. Yulon Motor Co |
| Taiwan Mobile vs. Chunghwa Telecom Co | Taiwan Mobile vs. CTBC Financial Holding | Taiwan Mobile vs. Fubon Financial Holding | Taiwan Mobile vs. President Chain Store |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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