Correlation Between Ho Tung and Formosan Union
Can any of the company-specific risk be diversified away by investing in both Ho Tung and Formosan Union 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 Ho Tung and Formosan Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ho Tung Chemical and Formosan Union Chemical, you can compare the effects of market volatilities on Ho Tung and Formosan Union 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 Ho Tung with a short position of Formosan Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ho Tung and Formosan Union.
Diversification Opportunities for Ho Tung and Formosan Union
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 1714 and Formosan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ho Tung Chemical and Formosan Union Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosan Union Chemical and Ho Tung 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 Ho Tung Chemical are associated (or correlated) with Formosan Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosan Union Chemical has no effect on the direction of Ho Tung i.e., Ho Tung and Formosan Union go up and down completely randomly.
Pair Corralation between Ho Tung and Formosan Union
Assuming the 90 days trading horizon Ho Tung Chemical is expected to under-perform the Formosan Union. But the stock apears to be less risky and, when comparing its historical volatility, Ho Tung Chemical is 1.39 times less risky than Formosan Union. The stock trades about -0.03 of its potential returns per unit of risk. The Formosan Union Chemical is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,060 in Formosan Union Chemical on October 21, 2024 and sell it today you would lose (40.00) from holding Formosan Union Chemical or give up 1.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ho Tung Chemical vs. Formosan Union Chemical
Performance |
| Timeline |
| Ho Tung Chemical |
| Formosan Union Chemical |
Ho Tung and Formosan Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ho Tung and Formosan Union
The main advantage of trading using opposite Ho Tung and Formosan Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ho Tung position performs unexpectedly, Formosan Union 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 Formosan Union will offset losses from the drop in Formosan Union's long position.| Ho Tung vs. Everlight Chemical Industrial | Ho Tung vs. China Man Made Fiber | Ho Tung vs. Oriental Union Chemical | Ho Tung vs. Grand Pacific Petrochemical |
| 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 |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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