Correlation Between Formosa Chemicals and Celxpert Energy
Can any of the company-specific risk be diversified away by investing in both Formosa Chemicals and Celxpert Energy 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 Celxpert Energy 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 Celxpert Energy, you can compare the effects of market volatilities on Formosa Chemicals and Celxpert Energy 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 Celxpert Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Chemicals and Celxpert Energy.
Diversification Opportunities for Formosa Chemicals and Celxpert Energy
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Formosa and Celxpert is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Chemicals Fibre and Celxpert Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celxpert Energy 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 Celxpert Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celxpert Energy has no effect on the direction of Formosa Chemicals i.e., Formosa Chemicals and Celxpert Energy go up and down completely randomly.
Pair Corralation between Formosa Chemicals and Celxpert Energy
Assuming the 90 days trading horizon Formosa Chemicals Fibre is expected to under-perform the Celxpert Energy. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Chemicals Fibre is 3.95 times less risky than Celxpert Energy. The stock trades about -0.28 of its potential returns per unit of risk. The Celxpert Energy is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,545 in Celxpert Energy on September 13, 2024 and sell it today you would earn a total of 1,055 from holding Celxpert Energy or generate 41.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Formosa Chemicals Fibre vs. Celxpert Energy
Performance |
| Timeline |
| Formosa Chemicals Fibre |
| Celxpert Energy |
Formosa Chemicals and Celxpert Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Chemicals and Celxpert Energy
The main advantage of trading using opposite Formosa Chemicals and Celxpert Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Chemicals position performs unexpectedly, Celxpert Energy 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 Celxpert Energy will offset losses from the drop in Celxpert Energy's long position.| Formosa Chemicals vs. Tainan Spinning Co | Formosa Chemicals vs. Lealea Enterprise Co | Formosa Chemicals vs. China Petrochemical Development | Formosa Chemicals vs. Ruentex Development Co |
| Celxpert Energy vs. San Fu Chemical | Celxpert Energy vs. Data International Co | Celxpert Energy vs. Mechema Chemicals Int | Celxpert Energy vs. Evergreen International Storage |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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