Correlation Between Formosa Chemicals and MetaTech
Can any of the company-specific risk be diversified away by investing in both Formosa Chemicals and MetaTech 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 MetaTech 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 MetaTech AP, you can compare the effects of market volatilities on Formosa Chemicals and MetaTech 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 MetaTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Chemicals and MetaTech.
Diversification Opportunities for Formosa Chemicals and MetaTech
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosa and MetaTech is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Chemicals Fibre and MetaTech AP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetaTech AP 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 MetaTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetaTech AP has no effect on the direction of Formosa Chemicals i.e., Formosa Chemicals and MetaTech go up and down completely randomly.
Pair Corralation between Formosa Chemicals and MetaTech
Assuming the 90 days trading horizon Formosa Chemicals Fibre is expected to under-perform the MetaTech. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Chemicals Fibre is 1.2 times less risky than MetaTech. The stock trades about -0.32 of its potential returns per unit of risk. The MetaTech AP is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,705 in MetaTech AP on September 1, 2024 and sell it today you would earn a total of 295.00 from holding MetaTech AP or generate 6.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Formosa Chemicals Fibre vs. MetaTech AP
Performance |
| Timeline |
| Formosa Chemicals Fibre |
| MetaTech AP |
Formosa Chemicals and MetaTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Chemicals and MetaTech
The main advantage of trading using opposite Formosa Chemicals and MetaTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Chemicals position performs unexpectedly, MetaTech 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 MetaTech will offset losses from the drop in MetaTech's long position.| Formosa Chemicals vs. Basso Industry Corp | Formosa Chemicals vs. Chung Hsin Electric Machinery | Formosa Chemicals vs. TYC Brother Industrial | Formosa Chemicals vs. TECO Electric Machinery |
| MetaTech vs. International CSRC Investment | MetaTech vs. Oceanic Beverages Co | MetaTech vs. Pacific Hospital Supply | MetaTech vs. Formosa Chemicals Fibre |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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