Correlation Between Chia Her and Formosa International
Can any of the company-specific risk be diversified away by investing in both Chia Her and Formosa International 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 Chia Her and Formosa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chia Her Industrial and Formosa International Hotels, you can compare the effects of market volatilities on Chia Her and Formosa International 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 Chia Her with a short position of Formosa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia Her and Formosa International.
Diversification Opportunities for Chia Her and Formosa International
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chia and Formosa is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chia Her Industrial and Formosa International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa International and Chia Her 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 Chia Her Industrial are associated (or correlated) with Formosa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa International has no effect on the direction of Chia Her i.e., Chia Her and Formosa International go up and down completely randomly.
Pair Corralation between Chia Her and Formosa International
Assuming the 90 days trading horizon Chia Her Industrial is expected to generate 5.5 times more return on investment than Formosa International. However, Chia Her is 5.5 times more volatile than Formosa International Hotels. It trades about 0.17 of its potential returns per unit of risk. Formosa International Hotels is currently generating about -0.17 per unit of risk. If you would invest 1,830 in Chia Her Industrial on September 3, 2024 and sell it today you would earn a total of 545.00 from holding Chia Her Industrial or generate 29.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chia Her Industrial vs. Formosa International Hotels
Performance |
| Timeline |
| Chia Her Industrial |
| Formosa International |
Chia Her and Formosa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chia Her and Formosa International
The main advantage of trading using opposite Chia Her and Formosa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia Her position performs unexpectedly, Formosa International 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 International will offset losses from the drop in Formosa International's long position.| Chia Her vs. Carnival Industrial Corp | Chia Her vs. I Hwa Industrial Co | Chia Her vs. Hung Chou Fiber | Chia Her vs. Tung Ho Textile |
| Formosa International vs. Tainan Spinning Co | Formosa International vs. Chia Her Industrial | Formosa International vs. WiseChip Semiconductor | Formosa International vs. Novatek Microelectronics Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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