Correlation Between Formosan Union and PCL Technologies
Can any of the company-specific risk be diversified away by investing in both Formosan Union and PCL Technologies 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 PCL Technologies 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 PCL Technologies, you can compare the effects of market volatilities on Formosan Union and PCL Technologies 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 PCL Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Union and PCL Technologies.
Diversification Opportunities for Formosan Union and PCL Technologies
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosan and PCL is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Union Chemical and PCL Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCL Technologies 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 PCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCL Technologies has no effect on the direction of Formosan Union i.e., Formosan Union and PCL Technologies go up and down completely randomly.
Pair Corralation between Formosan Union and PCL Technologies
Assuming the 90 days trading horizon Formosan Union is expected to generate 7.08 times less return on investment than PCL Technologies. But when comparing it to its historical volatility, Formosan Union Chemical is 1.6 times less risky than PCL Technologies. It trades about 0.03 of its potential returns per unit of risk. PCL Technologies is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7,330 in PCL Technologies on September 3, 2024 and sell it today you would earn a total of 4,470 from holding PCL Technologies or generate 60.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Union Chemical vs. PCL Technologies
Performance |
| Timeline |
| Formosan Union Chemical |
| PCL Technologies |
Formosan Union and PCL Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Union and PCL Technologies
The main advantage of trading using opposite Formosan Union and PCL Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Union position performs unexpectedly, PCL Technologies 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 PCL Technologies will offset losses from the drop in PCL Technologies' long position.The idea behind Formosan Union Chemical and PCL Technologies 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.| PCL Technologies vs. Phison Electronics | PCL Technologies vs. Transcend Information | PCL Technologies vs. Infortrend Technology | PCL Technologies vs. Ate Energy International |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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