Correlation Between Lily Textile and Formosa Taffeta
Can any of the company-specific risk be diversified away by investing in both Lily Textile and Formosa Taffeta 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 Lily Textile and Formosa Taffeta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lily Textile Co and Formosa Taffeta Co, you can compare the effects of market volatilities on Lily Textile and Formosa Taffeta 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 Lily Textile with a short position of Formosa Taffeta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lily Textile and Formosa Taffeta.
Diversification Opportunities for Lily Textile and Formosa Taffeta
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lily and Formosa is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lily Textile Co and Formosa Taffeta Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Taffeta and Lily Textile 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 Lily Textile Co are associated (or correlated) with Formosa Taffeta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Taffeta has no effect on the direction of Lily Textile i.e., Lily Textile and Formosa Taffeta go up and down completely randomly.
Pair Corralation between Lily Textile and Formosa Taffeta
Assuming the 90 days trading horizon Lily Textile Co is expected to generate 1.98 times more return on investment than Formosa Taffeta. However, Lily Textile is 1.98 times more volatile than Formosa Taffeta Co. It trades about 0.06 of its potential returns per unit of risk. Formosa Taffeta Co is currently generating about -0.06 per unit of risk. If you would invest 2,155 in Lily Textile Co on August 25, 2024 and sell it today you would earn a total of 1,155 from holding Lily Textile Co or generate 53.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lily Textile Co vs. Formosa Taffeta Co
Performance |
| Timeline |
| Lily Textile |
| Formosa Taffeta |
Lily Textile and Formosa Taffeta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lily Textile and Formosa Taffeta
The main advantage of trading using opposite Lily Textile and Formosa Taffeta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lily Textile position performs unexpectedly, Formosa Taffeta 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 Taffeta will offset losses from the drop in Formosa Taffeta's long position.| Lily Textile vs. Taiwan Semiconductor Manufacturing | Lily Textile vs. Hon Hai Precision | Lily Textile vs. MediaTek | Lily Textile vs. Chunghwa Telecom Co |
| Formosa Taffeta vs. Taiwan Semiconductor Manufacturing | Formosa Taffeta vs. Hon Hai Precision | Formosa Taffeta vs. MediaTek | Formosa Taffeta vs. Chunghwa Telecom 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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