Correlation Between Shiny Chemical and Formosan Union
Can any of the company-specific risk be diversified away by investing in both Shiny Chemical 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 Shiny Chemical and Formosan Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shiny Chemical Industrial and Formosan Union Chemical, you can compare the effects of market volatilities on Shiny Chemical 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 Shiny Chemical with a short position of Formosan Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiny Chemical and Formosan Union.
Diversification Opportunities for Shiny Chemical and Formosan Union
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shiny and Formosan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Shiny Chemical Industrial 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 Shiny Chemical 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 Shiny Chemical Industrial 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 Shiny Chemical i.e., Shiny Chemical and Formosan Union go up and down completely randomly.
Pair Corralation between Shiny Chemical and Formosan Union
Assuming the 90 days trading horizon Shiny Chemical Industrial is expected to generate 1.27 times more return on investment than Formosan Union. However, Shiny Chemical is 1.27 times more volatile than Formosan Union Chemical. It trades about 0.03 of its potential returns per unit of risk. Formosan Union Chemical is currently generating about -0.01 per unit of risk. If you would invest 12,550 in Shiny Chemical Industrial on November 27, 2024 and sell it today you would earn a total of 2,900 from holding Shiny Chemical Industrial or generate 23.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shiny Chemical Industrial vs. Formosan Union Chemical
Performance |
| Timeline |
| Shiny Chemical Industrial |
| Formosan Union Chemical |
Shiny Chemical and Formosan Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shiny Chemical and Formosan Union
The main advantage of trading using opposite Shiny Chemical and Formosan Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shiny Chemical 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.| Shiny Chemical vs. Chung Hwa Chemical | Shiny Chemical vs. China Man Made Fiber | Shiny Chemical vs. Sesoda Corp | Shiny Chemical vs. Everlight Chemical Industrial |
| Formosan Union vs. Chung Hwa Chemical | Formosan Union vs. China Man Made Fiber | Formosan Union vs. Sesoda Corp | Formosan Union vs. Everlight Chemical Industrial |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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