Correlation Between Asia Plastic and Formosa Petrochemical
Can any of the company-specific risk be diversified away by investing in both Asia Plastic and Formosa Petrochemical 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 Asia Plastic and Formosa Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia Plastic Recycling and Formosa Petrochemical Corp, you can compare the effects of market volatilities on Asia Plastic and Formosa Petrochemical 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 Asia Plastic with a short position of Formosa Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Plastic and Formosa Petrochemical.
Diversification Opportunities for Asia Plastic and Formosa Petrochemical
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Asia and Formosa is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Asia Plastic Recycling and Formosa Petrochemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Petrochemical and Asia Plastic 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 Asia Plastic Recycling are associated (or correlated) with Formosa Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Petrochemical has no effect on the direction of Asia Plastic i.e., Asia Plastic and Formosa Petrochemical go up and down completely randomly.
Pair Corralation between Asia Plastic and Formosa Petrochemical
Assuming the 90 days trading horizon Asia Plastic Recycling is expected to generate 0.58 times more return on investment than Formosa Petrochemical. However, Asia Plastic Recycling is 1.74 times less risky than Formosa Petrochemical. It trades about -0.02 of its potential returns per unit of risk. Formosa Petrochemical Corp is currently generating about -0.45 per unit of risk. If you would invest 697.00 in Asia Plastic Recycling on September 13, 2024 and sell it today you would lose (3.00) from holding Asia Plastic Recycling or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Asia Plastic Recycling vs. Formosa Petrochemical Corp
Performance |
| Timeline |
| Asia Plastic Recycling |
| Formosa Petrochemical |
Asia Plastic and Formosa Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asia Plastic and Formosa Petrochemical
The main advantage of trading using opposite Asia Plastic and Formosa Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Plastic position performs unexpectedly, Formosa Petrochemical 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 Petrochemical will offset losses from the drop in Formosa Petrochemical's long position.| Asia Plastic vs. Victory New Materials | Asia Plastic vs. Hunya Foods Co | Asia Plastic vs. YCC Parts MFG | Asia Plastic vs. Kwong Fong Industries |
| Formosa Petrochemical vs. Chief Telecom | Formosa Petrochemical vs. Apex Biotechnology Corp | Formosa Petrochemical vs. Insyde Software | Formosa Petrochemical vs. SynCore 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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