Correlation Between Formosan Union and Generalplus Technology
Can any of the company-specific risk be diversified away by investing in both Formosan Union and Generalplus Technology 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 Generalplus Technology 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 Generalplus Technology, you can compare the effects of market volatilities on Formosan Union and Generalplus Technology 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 Generalplus Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Union and Generalplus Technology.
Diversification Opportunities for Formosan Union and Generalplus Technology
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosan and Generalplus is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Union Chemical and Generalplus Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generalplus Technology 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 Generalplus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generalplus Technology has no effect on the direction of Formosan Union i.e., Formosan Union and Generalplus Technology go up and down completely randomly.
Pair Corralation between Formosan Union and Generalplus Technology
Assuming the 90 days trading horizon Formosan Union is expected to generate 38.13 times less return on investment than Generalplus Technology. But when comparing it to its historical volatility, Formosan Union Chemical is 1.32 times less risky than Generalplus Technology. It trades about 0.0 of its potential returns per unit of risk. Generalplus Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,765 in Generalplus Technology on September 3, 2024 and sell it today you would earn a total of 245.00 from holding Generalplus Technology or generate 5.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Union Chemical vs. Generalplus Technology
Performance |
| Timeline |
| Formosan Union Chemical |
| Generalplus Technology |
Formosan Union and Generalplus Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Union and Generalplus Technology
The main advantage of trading using opposite Formosan Union and Generalplus Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Union position performs unexpectedly, Generalplus Technology 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 Generalplus Technology will offset losses from the drop in Generalplus Technology's long position.The idea behind Formosan Union Chemical and Generalplus Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Generalplus Technology vs. Holtek Semiconductor | Generalplus Technology vs. Nuvoton Technology Corp | Generalplus Technology vs. Sonix Technology Co | Generalplus Technology vs. Global Unichip 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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