Correlation Between Formosa Plastics and Great Taipei
Can any of the company-specific risk be diversified away by investing in both Formosa Plastics and Great Taipei 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 Great Taipei 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 Great Taipei Gas, you can compare the effects of market volatilities on Formosa Plastics and Great Taipei 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 Great Taipei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Plastics and Great Taipei.
Diversification Opportunities for Formosa Plastics and Great Taipei
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosa and Great is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Plastics Corp and Great Taipei Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Taipei Gas 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 Great Taipei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Taipei Gas has no effect on the direction of Formosa Plastics i.e., Formosa Plastics and Great Taipei go up and down completely randomly.
Pair Corralation between Formosa Plastics and Great Taipei
Assuming the 90 days trading horizon Formosa Plastics Corp is expected to under-perform the Great Taipei. In addition to that, Formosa Plastics is 9.44 times more volatile than Great Taipei Gas. It trades about -0.2 of its total potential returns per unit of risk. Great Taipei Gas is currently generating about 0.12 per unit of volatility. If you would invest 3,015 in Great Taipei Gas on August 31, 2024 and sell it today you would earn a total of 20.00 from holding Great Taipei Gas or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Formosa Plastics Corp vs. Great Taipei Gas
Performance |
| Timeline |
| Formosa Plastics Corp |
| Great Taipei Gas |
Formosa Plastics and Great Taipei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Plastics and Great Taipei
The main advantage of trading using opposite Formosa Plastics and Great Taipei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Plastics position performs unexpectedly, Great Taipei 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 Great Taipei will offset losses from the drop in Great Taipei's long position.| Formosa Plastics vs. Basso Industry Corp | Formosa Plastics vs. Chung Hsin Electric Machinery | Formosa Plastics vs. TYC Brother Industrial | Formosa Plastics vs. TECO Electric Machinery |
| Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Taiwan Cogeneration Corp | Great Taipei vs. Shin Shin Natural |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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