Correlation Between First Copper and Formosa Plastics
Can any of the company-specific risk be diversified away by investing in both First Copper and Formosa Plastics 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 First Copper and Formosa Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Copper Technology and Formosa Plastics Corp, you can compare the effects of market volatilities on First Copper and Formosa Plastics 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 First Copper with a short position of Formosa Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Copper and Formosa Plastics.
Diversification Opportunities for First Copper and Formosa Plastics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Formosa is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Copper Technology and Formosa Plastics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Plastics Corp and First Copper 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 First Copper Technology are associated (or correlated) with Formosa Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Plastics Corp has no effect on the direction of First Copper i.e., First Copper and Formosa Plastics go up and down completely randomly.
Pair Corralation between First Copper and Formosa Plastics
Assuming the 90 days trading horizon First Copper Technology is expected to generate 1.99 times more return on investment than Formosa Plastics. However, First Copper is 1.99 times more volatile than Formosa Plastics Corp. It trades about 0.03 of its potential returns per unit of risk. Formosa Plastics Corp is currently generating about -0.12 per unit of risk. If you would invest 3,210 in First Copper Technology on September 4, 2024 and sell it today you would earn a total of 680.00 from holding First Copper Technology or generate 21.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Copper Technology vs. Formosa Plastics Corp
Performance |
| Timeline |
| First Copper Technology |
| Formosa Plastics Corp |
First Copper and Formosa Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Copper and Formosa Plastics
The main advantage of trading using opposite First Copper and Formosa Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Copper position performs unexpectedly, Formosa Plastics 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 Plastics will offset losses from the drop in Formosa Plastics' long position.The idea behind First Copper Technology and Formosa Plastics Corp 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.| Formosa Plastics vs. Nan Ya Plastics | Formosa Plastics vs. Formosa Chemicals Fibre | Formosa Plastics vs. China Steel Corp | Formosa Plastics vs. Formosa Petrochemical Corp |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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