Correlation Between International CSRC and Formosa Petrochemical
Can any of the company-specific risk be diversified away by investing in both International CSRC 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 International CSRC and Formosa Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International CSRC Investment and Formosa Petrochemical Corp, you can compare the effects of market volatilities on International CSRC 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 International CSRC with a short position of Formosa Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of International CSRC and Formosa Petrochemical.
Diversification Opportunities for International CSRC and Formosa Petrochemical
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Formosa is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding International CSRC Investment and Formosa Petrochemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Petrochemical and International CSRC 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 International CSRC Investment 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 International CSRC i.e., International CSRC and Formosa Petrochemical go up and down completely randomly.
Pair Corralation between International CSRC and Formosa Petrochemical
Assuming the 90 days trading horizon International CSRC Investment is expected to generate 0.88 times more return on investment than Formosa Petrochemical. However, International CSRC Investment is 1.14 times less risky than Formosa Petrochemical. It trades about -0.05 of its potential returns per unit of risk. Formosa Petrochemical Corp is currently generating about -0.11 per unit of risk. If you would invest 2,005 in International CSRC Investment on September 4, 2024 and sell it today you would lose (500.00) from holding International CSRC Investment or give up 24.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International CSRC Investment vs. Formosa Petrochemical Corp
Performance |
| Timeline |
| International CSRC |
| Formosa Petrochemical |
International CSRC and Formosa Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International CSRC and Formosa Petrochemical
The main advantage of trading using opposite International CSRC and Formosa Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International CSRC 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.| International CSRC vs. Cheng Shin Rubber | International CSRC vs. TSRC Corp | International CSRC vs. Taiwan Cement Corp | International CSRC vs. China Steel Chemical |
| 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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