Correlation Between Cheng Shin and Formosa Plastics
Can any of the company-specific risk be diversified away by investing in both Cheng Shin 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 Cheng Shin and Formosa Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheng Shin Rubber and Formosa Plastics Corp, you can compare the effects of market volatilities on Cheng Shin 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 Cheng Shin with a short position of Formosa Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Formosa Plastics.
Diversification Opportunities for Cheng Shin and Formosa Plastics
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cheng and Formosa is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cheng Shin Rubber 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 Cheng Shin 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 Cheng Shin Rubber 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 Cheng Shin i.e., Cheng Shin and Formosa Plastics go up and down completely randomly.
Pair Corralation between Cheng Shin and Formosa Plastics
Assuming the 90 days trading horizon Cheng Shin Rubber is expected to generate 0.82 times more return on investment than Formosa Plastics. However, Cheng Shin Rubber is 1.22 times less risky than Formosa Plastics. It trades about 0.06 of its potential returns per unit of risk. Formosa Plastics Corp is currently generating about -0.17 per unit of risk. If you would invest 4,640 in Cheng Shin Rubber on October 26, 2024 and sell it today you would earn a total of 325.00 from holding Cheng Shin Rubber or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheng Shin Rubber vs. Formosa Plastics Corp
Performance |
| Timeline |
| Cheng Shin Rubber |
| Formosa Plastics Corp |
Cheng Shin and Formosa Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheng Shin and Formosa Plastics
The main advantage of trading using opposite Cheng Shin and Formosa Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheng Shin 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.| Cheng Shin vs. Uni President Enterprises Corp | Cheng Shin vs. Formosa Chemicals Fibre | Cheng Shin vs. Asia Cement Corp | Cheng Shin vs. Pou Chen Corp |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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