Correlation Between Formosan Union and Sports Gear
Can any of the company-specific risk be diversified away by investing in both Formosan Union and Sports Gear 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 Sports Gear 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 Sports Gear Co, you can compare the effects of market volatilities on Formosan Union and Sports Gear 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 Sports Gear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Union and Sports Gear.
Diversification Opportunities for Formosan Union and Sports Gear
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Formosan and Sports is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Union Chemical and Sports Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Gear 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 Sports Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Gear has no effect on the direction of Formosan Union i.e., Formosan Union and Sports Gear go up and down completely randomly.
Pair Corralation between Formosan Union and Sports Gear
Assuming the 90 days trading horizon Formosan Union is expected to generate 12.81 times less return on investment than Sports Gear. But when comparing it to its historical volatility, Formosan Union Chemical is 1.42 times less risky than Sports Gear. It trades about 0.02 of its potential returns per unit of risk. Sports Gear Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 6,371 in Sports Gear Co on September 1, 2024 and sell it today you would earn a total of 7,479 from holding Sports Gear Co or generate 117.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Union Chemical vs. Sports Gear Co
Performance |
| Timeline |
| Formosan Union Chemical |
| Sports Gear |
Formosan Union and Sports Gear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Union and Sports Gear
The main advantage of trading using opposite Formosan Union and Sports Gear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Union position performs unexpectedly, Sports Gear 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 Sports Gear will offset losses from the drop in Sports Gear's long position.| Formosan Union vs. Oriental Union Chemical | Formosan Union vs. Everlight Chemical Industrial | Formosan Union vs. China Man Made Fiber | Formosan Union vs. Ho Tung Chemical |
| Sports Gear vs. Giant Manufacturing Co | Sports Gear vs. Merida Industry Co | Sports Gear vs. Johnson Health Tech | Sports Gear vs. Power Wind Health |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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