Correlation Between Formosan Union and Taita Chemical
Can any of the company-specific risk be diversified away by investing in both Formosan Union and Taita Chemical 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 Formosan Union and Taita Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosan Union Chemical and Taita Chemical Co, you can compare the effects of market volatilities on Formosan Union and Taita Chemical 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 Formosan Union with a short position of Taita Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Union and Taita Chemical.
Diversification Opportunities for Formosan Union and Taita Chemical
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formosan and Taita is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Union Chemical and Taita Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taita Chemical and Formosan Union 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 Formosan Union Chemical are associated (or correlated) with Taita Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taita Chemical has no effect on the direction of Formosan Union i.e., Formosan Union and Taita Chemical go up and down completely randomly.
Pair Corralation between Formosan Union and Taita Chemical
Assuming the 90 days trading horizon Formosan Union Chemical is expected to generate 0.56 times more return on investment than Taita Chemical. However, Formosan Union Chemical is 1.79 times less risky than Taita Chemical. It trades about 0.46 of its potential returns per unit of risk. Taita Chemical Co is currently generating about 0.22 per unit of risk. If you would invest 2,020 in Formosan Union Chemical on November 27, 2024 and sell it today you would earn a total of 165.00 from holding Formosan Union Chemical or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Union Chemical vs. Taita Chemical Co
Performance |
| Timeline |
| Formosan Union Chemical |
| Taita Chemical |
Formosan Union and Taita Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Union and Taita Chemical
The main advantage of trading using opposite Formosan Union and Taita Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Union position performs unexpectedly, Taita Chemical 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 Taita Chemical will offset losses from the drop in Taita Chemical's long position.| Formosan Union vs. Chung Hwa Chemical | Formosan Union vs. China Man Made Fiber | Formosan Union vs. Sesoda Corp | Formosan Union vs. Everlight Chemical Industrial |
| Taita Chemical vs. China General Plastics | Taita Chemical vs. Asia Polymer Corp | Taita Chemical vs. USI Corp | Taita Chemical vs. Grand Pacific Petrochemical |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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