Correlation Between Formosa Taffeta and Baotek Industrial
Can any of the company-specific risk be diversified away by investing in both Formosa Taffeta and Baotek Industrial 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 Taffeta and Baotek Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Taffeta Co and Baotek Industrial Materials, you can compare the effects of market volatilities on Formosa Taffeta and Baotek Industrial 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 Taffeta with a short position of Baotek Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Taffeta and Baotek Industrial.
Diversification Opportunities for Formosa Taffeta and Baotek Industrial
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Formosa and Baotek is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Taffeta Co and Baotek Industrial Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baotek Industrial and Formosa Taffeta 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 Taffeta Co are associated (or correlated) with Baotek Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baotek Industrial has no effect on the direction of Formosa Taffeta i.e., Formosa Taffeta and Baotek Industrial go up and down completely randomly.
Pair Corralation between Formosa Taffeta and Baotek Industrial
Assuming the 90 days trading horizon Formosa Taffeta Co is expected to generate 0.62 times more return on investment than Baotek Industrial. However, Formosa Taffeta Co is 1.61 times less risky than Baotek Industrial. It trades about -0.15 of its potential returns per unit of risk. Baotek Industrial Materials is currently generating about -0.26 per unit of risk. If you would invest 2,050 in Formosa Taffeta Co on October 25, 2024 and sell it today you would lose (155.00) from holding Formosa Taffeta Co or give up 7.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Taffeta Co vs. Baotek Industrial Materials
Performance |
| Timeline |
| Formosa Taffeta |
| Baotek Industrial |
Formosa Taffeta and Baotek Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Taffeta and Baotek Industrial
The main advantage of trading using opposite Formosa Taffeta and Baotek Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Taffeta position performs unexpectedly, Baotek Industrial 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 Baotek Industrial will offset losses from the drop in Baotek Industrial's long position.| Formosa Taffeta vs. Far Eastern New | Formosa Taffeta vs. Formosa Chemicals Fibre | Formosa Taffeta vs. Nan Ya Plastics | Formosa Taffeta vs. Asia Cement Corp |
| Baotek Industrial vs. Far Eastern New | Baotek Industrial vs. Eclat Textile Co | Baotek Industrial vs. Ruentex Industries | Baotek Industrial vs. Formosa Taffeta 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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