Correlation Between Formosa Chemicals and Shin Ruenn
Can any of the company-specific risk be diversified away by investing in both Formosa Chemicals and Shin Ruenn 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 Shin Ruenn 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 Shin Ruenn Development, you can compare the effects of market volatilities on Formosa Chemicals and Shin Ruenn 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 Shin Ruenn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Chemicals and Shin Ruenn.
Diversification Opportunities for Formosa Chemicals and Shin Ruenn
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Formosa and Shin is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Chemicals Fibre and Shin Ruenn Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Ruenn Development 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 Shin Ruenn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Ruenn Development has no effect on the direction of Formosa Chemicals i.e., Formosa Chemicals and Shin Ruenn go up and down completely randomly.
Pair Corralation between Formosa Chemicals and Shin Ruenn
Assuming the 90 days trading horizon Formosa Chemicals is expected to generate 1.09 times less return on investment than Shin Ruenn. In addition to that, Formosa Chemicals is 1.66 times more volatile than Shin Ruenn Development. It trades about 0.17 of its total potential returns per unit of risk. Shin Ruenn Development is currently generating about 0.3 per unit of volatility. If you would invest 5,980 in Shin Ruenn Development on November 29, 2024 and sell it today you would earn a total of 470.00 from holding Shin Ruenn Development or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Formosa Chemicals Fibre vs. Shin Ruenn Development
Performance |
| Timeline |
| Formosa Chemicals Fibre |
| Shin Ruenn Development |
Formosa Chemicals and Shin Ruenn Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Chemicals and Shin Ruenn
The main advantage of trading using opposite Formosa Chemicals and Shin Ruenn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Chemicals position performs unexpectedly, Shin Ruenn 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 Shin Ruenn will offset losses from the drop in Shin Ruenn'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 |
| Shin Ruenn vs. Double Bond Chemical | Shin Ruenn vs. Formosan Union Chemical | Shin Ruenn vs. Oriental Union Chemical | Shin Ruenn vs. Simplo Technology 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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