Correlation Between Chien Shing and Formosa Petrochemical
Can any of the company-specific risk be diversified away by investing in both Chien Shing 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 Chien Shing and Formosa Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chien Shing Stainless and Formosa Petrochemical Corp, you can compare the effects of market volatilities on Chien Shing 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 Chien Shing with a short position of Formosa Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chien Shing and Formosa Petrochemical.
Diversification Opportunities for Chien Shing and Formosa Petrochemical
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chien and Formosa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chien Shing Stainless and Formosa Petrochemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Petrochemical and Chien Shing 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 Chien Shing Stainless 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 Chien Shing i.e., Chien Shing and Formosa Petrochemical go up and down completely randomly.
Pair Corralation between Chien Shing and Formosa Petrochemical
Assuming the 90 days trading horizon Chien Shing Stainless is expected to generate 2.08 times more return on investment than Formosa Petrochemical. However, Chien Shing is 2.08 times more volatile than Formosa Petrochemical Corp. It trades about 0.07 of its potential returns per unit of risk. Formosa Petrochemical Corp is currently generating about -0.14 per unit of risk. If you would invest 574.00 in Chien Shing Stainless on September 4, 2024 and sell it today you would earn a total of 516.00 from holding Chien Shing Stainless or generate 89.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chien Shing Stainless vs. Formosa Petrochemical Corp
Performance |
| Timeline |
| Chien Shing Stainless |
| Formosa Petrochemical |
Chien Shing and Formosa Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chien Shing and Formosa Petrochemical
The main advantage of trading using opposite Chien Shing and Formosa Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chien Shing 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.| Chien Shing vs. Chung Hung Steel | Chien Shing vs. Chun Yuan Steel | Chien Shing vs. Yieh Hsing Enterprise | Chien Shing vs. Hsin Kuang Steel |
| Formosa Petrochemical vs. Quintain Steel Co | Formosa Petrochemical vs. Tung Ho Steel | Formosa Petrochemical vs. Sunny Friend Environmental | Formosa Petrochemical vs. Iron Force 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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