Correlation Between Eternal Materials and Formosa Petrochemical
Can any of the company-specific risk be diversified away by investing in both Eternal Materials and Formosa Petrochemical 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 Eternal Materials and Formosa Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eternal Materials Co and Formosa Petrochemical Corp, you can compare the effects of market volatilities on Eternal Materials and Formosa Petrochemical 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 Eternal Materials with a short position of Formosa Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Materials and Formosa Petrochemical.
Diversification Opportunities for Eternal Materials and Formosa Petrochemical
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eternal and Formosa is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Materials Co and Formosa Petrochemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Petrochemical and Eternal Materials 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 Eternal Materials Co are associated (or correlated) with Formosa Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Petrochemical has no effect on the direction of Eternal Materials i.e., Eternal Materials and Formosa Petrochemical go up and down completely randomly.
Pair Corralation between Eternal Materials and Formosa Petrochemical
Assuming the 90 days trading horizon Eternal Materials Co is expected to generate 0.84 times more return on investment than Formosa Petrochemical. However, Eternal Materials Co is 1.2 times less risky than Formosa Petrochemical. It trades about -0.03 of its potential returns per unit of risk. Formosa Petrochemical Corp is currently generating about -0.18 per unit of risk. If you would invest 3,020 in Eternal Materials Co on September 12, 2024 and sell it today you would lose (90.00) from holding Eternal Materials Co or give up 2.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eternal Materials Co vs. Formosa Petrochemical Corp
Performance |
| Timeline |
| Eternal Materials |
| Formosa Petrochemical |
Eternal Materials and Formosa Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eternal Materials and Formosa Petrochemical
The main advantage of trading using opposite Eternal Materials and Formosa Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eternal Materials position performs unexpectedly, Formosa Petrochemical 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 Formosa Petrochemical will offset losses from the drop in Formosa Petrochemical's long position.| Eternal Materials vs. Tainan Spinning Co | Eternal Materials vs. Lealea Enterprise Co | Eternal Materials vs. China Petrochemical Development | Eternal Materials vs. Ruentex Development Co |
| Formosa Petrochemical vs. President Chain Store | Formosa Petrochemical vs. Huaku Development Co | Formosa Petrochemical vs. Formosa International Hotels | Formosa Petrochemical vs. Taiwan Fu Hsing |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |