Correlation Between Formosa Chemicals and Asia Cement
Can any of the company-specific risk be diversified away by investing in both Formosa Chemicals and Asia Cement 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 Chemicals and Asia Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Chemicals Fibre and Asia Cement Corp, you can compare the effects of market volatilities on Formosa Chemicals and Asia Cement 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 Chemicals with a short position of Asia Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Chemicals and Asia Cement.
Diversification Opportunities for Formosa Chemicals and Asia Cement
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Formosa and Asia is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Chemicals Fibre and Asia Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Cement Corp and Formosa Chemicals 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 Chemicals Fibre are associated (or correlated) with Asia Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Cement Corp has no effect on the direction of Formosa Chemicals i.e., Formosa Chemicals and Asia Cement go up and down completely randomly.
Pair Corralation between Formosa Chemicals and Asia Cement
Assuming the 90 days trading horizon Formosa Chemicals Fibre is expected to under-perform the Asia Cement. In addition to that, Formosa Chemicals is 1.54 times more volatile than Asia Cement Corp. It trades about -0.27 of its total potential returns per unit of risk. Asia Cement Corp is currently generating about -0.3 per unit of volatility. If you would invest 4,675 in Asia Cement Corp on August 29, 2024 and sell it today you would lose (340.00) from holding Asia Cement Corp or give up 7.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Chemicals Fibre vs. Asia Cement Corp
Performance |
| Timeline |
| Formosa Chemicals Fibre |
| Asia Cement Corp |
Formosa Chemicals and Asia Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Chemicals and Asia Cement
The main advantage of trading using opposite Formosa Chemicals and Asia Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Chemicals position performs unexpectedly, Asia Cement 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 Asia Cement will offset losses from the drop in Asia Cement's long position.| Formosa Chemicals vs. Formosa Plastics Corp | Formosa Chemicals vs. Nan Ya Plastics | Formosa Chemicals vs. Formosa Petrochemical Corp | Formosa Chemicals vs. Cathay Financial Holding |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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