Correlation Between Yieh Phui and Formosa Petrochemical
Can any of the company-specific risk be diversified away by investing in both Yieh Phui 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 Yieh Phui and Formosa Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yieh Phui Enterprise and Formosa Petrochemical Corp, you can compare the effects of market volatilities on Yieh Phui 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 Yieh Phui with a short position of Formosa Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yieh Phui and Formosa Petrochemical.
Diversification Opportunities for Yieh Phui and Formosa Petrochemical
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Yieh and Formosa is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Yieh Phui Enterprise and Formosa Petrochemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Petrochemical and Yieh Phui 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 Yieh Phui Enterprise 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 Yieh Phui i.e., Yieh Phui and Formosa Petrochemical go up and down completely randomly.
Pair Corralation between Yieh Phui and Formosa Petrochemical
Assuming the 90 days trading horizon Yieh Phui Enterprise is expected to generate 0.36 times more return on investment than Formosa Petrochemical. However, Yieh Phui Enterprise is 2.76 times less risky than Formosa Petrochemical. It trades about 0.0 of its potential returns per unit of risk. Formosa Petrochemical Corp is currently generating about -0.48 per unit of risk. If you would invest 1,520 in Yieh Phui Enterprise on September 3, 2024 and sell it today you would earn a total of 0.00 from holding Yieh Phui Enterprise or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yieh Phui Enterprise vs. Formosa Petrochemical Corp
Performance |
| Timeline |
| Yieh Phui Enterprise |
| Formosa Petrochemical |
Yieh Phui and Formosa Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yieh Phui and Formosa Petrochemical
The main advantage of trading using opposite Yieh Phui and Formosa Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yieh Phui 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.The idea behind Yieh Phui Enterprise and Formosa Petrochemical 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 Petrochemical vs. Taishin Financial Holding | Formosa Petrochemical vs. Oceanic Beverages Co | Formosa Petrochemical vs. Union Bank of | Formosa Petrochemical vs. Professional Computer Technology |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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