Correlation Between Nan Ya and Formosa Optical
Can any of the company-specific risk be diversified away by investing in both Nan Ya and Formosa Optical 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 Nan Ya and Formosa Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nan Ya Plastics and Formosa Optical Technology, you can compare the effects of market volatilities on Nan Ya and Formosa Optical 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 Nan Ya with a short position of Formosa Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Ya and Formosa Optical.
Diversification Opportunities for Nan Ya and Formosa Optical
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nan and Formosa is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nan Ya Plastics and Formosa Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Optical Tech and Nan Ya 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 Nan Ya Plastics are associated (or correlated) with Formosa Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Optical Tech has no effect on the direction of Nan Ya i.e., Nan Ya and Formosa Optical go up and down completely randomly.
Pair Corralation between Nan Ya and Formosa Optical
Assuming the 90 days trading horizon Nan Ya Plastics is expected to generate 3.16 times more return on investment than Formosa Optical. However, Nan Ya is 3.16 times more volatile than Formosa Optical Technology. It trades about 0.07 of its potential returns per unit of risk. Formosa Optical Technology is currently generating about 0.13 per unit of risk. If you would invest 3,135 in Nan Ya Plastics on October 25, 2024 and sell it today you would earn a total of 100.00 from holding Nan Ya Plastics or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nan Ya Plastics vs. Formosa Optical Technology
Performance |
| Timeline |
| Nan Ya Plastics |
| Formosa Optical Tech |
Nan Ya and Formosa Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nan Ya and Formosa Optical
The main advantage of trading using opposite Nan Ya and Formosa Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nan Ya position performs unexpectedly, Formosa Optical 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 Optical will offset losses from the drop in Formosa Optical's long position.| Nan Ya vs. Formosa Plastics Corp | Nan Ya vs. Formosa Chemicals Fibre | Nan Ya vs. China Steel Corp | Nan Ya vs. Formosa Petrochemical Corp |
| Formosa Optical vs. Quintain Steel Co | Formosa Optical vs. Tung Ho Steel | Formosa Optical vs. GeneFerm Biotechnology Co | Formosa Optical vs. Genovate Biotechnology Co |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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