Correlation Between Formosan Rubber and Cheng Shin
Can any of the company-specific risk be diversified away by investing in both Formosan Rubber and Cheng Shin 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 Cheng Shin 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 Cheng Shin Rubber, you can compare the effects of market volatilities on Formosan Rubber and Cheng Shin 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 Cheng Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and Cheng Shin.
Diversification Opportunities for Formosan Rubber and Cheng Shin
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosan and Cheng is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group and Cheng Shin Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Shin Rubber 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 Cheng Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Shin Rubber has no effect on the direction of Formosan Rubber i.e., Formosan Rubber and Cheng Shin go up and down completely randomly.
Pair Corralation between Formosan Rubber and Cheng Shin
Assuming the 90 days trading horizon Formosan Rubber Group is expected to generate 0.49 times more return on investment than Cheng Shin. However, Formosan Rubber Group is 2.04 times less risky than Cheng Shin. It trades about 0.16 of its potential returns per unit of risk. Cheng Shin Rubber is currently generating about 0.03 per unit of risk. If you would invest 2,555 in Formosan Rubber Group on December 11, 2024 and sell it today you would earn a total of 85.00 from holding Formosan Rubber Group or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Rubber Group vs. Cheng Shin Rubber
Performance |
| Timeline |
| Formosan Rubber Group |
| Cheng Shin Rubber |
Formosan Rubber and Cheng Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Rubber and Cheng Shin
The main advantage of trading using opposite Formosan Rubber and Cheng Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Rubber position performs unexpectedly, Cheng Shin 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 Cheng Shin will offset losses from the drop in Cheng Shin'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 |
| 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 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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