Correlation Between Formosan Rubber and China Mobile
Can any of the company-specific risk be diversified away by investing in both Formosan Rubber and China Mobile 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 Formosan Rubber and China Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosan Rubber Group and China Mobile, you can compare the effects of market volatilities on Formosan Rubber and China Mobile 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 Formosan Rubber with a short position of China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and China Mobile.
Diversification Opportunities for Formosan Rubber and China Mobile
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Formosan and China is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group and China Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile and Formosan Rubber 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 Formosan Rubber Group are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile has no effect on the direction of Formosan Rubber i.e., Formosan Rubber and China Mobile go up and down completely randomly.
Pair Corralation between Formosan Rubber and China Mobile
Assuming the 90 days trading horizon Formosan Rubber is expected to generate 4.52 times less return on investment than China Mobile. But when comparing it to its historical volatility, Formosan Rubber Group is 1.66 times less risky than China Mobile. It trades about 0.04 of its potential returns per unit of risk. China Mobile is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,345 in China Mobile on October 19, 2024 and sell it today you would earn a total of 63.00 from holding China Mobile or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Rubber Group vs. China Mobile
Performance |
| Timeline |
| Formosan Rubber Group |
| China Mobile |
Formosan Rubber and China Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Rubber and China Mobile
The main advantage of trading using opposite Formosan Rubber and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Rubber position performs unexpectedly, China Mobile 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 China Mobile will offset losses from the drop in China Mobile's long position.| Formosan Rubber vs. Nankang Rubber Tire | Formosan Rubber vs. Federal Corp | Formosan Rubber vs. Kenda Rubber Industrial | Formosan Rubber vs. Yulon Motor Co |
| China Mobile vs. Yonyu Plastics Co | China Mobile vs. DingZing Advanced Materials | China Mobile vs. Formosan Rubber Group | China Mobile vs. Chung Lien Transportation |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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