Correlation Between Formosan Rubber and Yem Chio
Can any of the company-specific risk be diversified away by investing in both Formosan Rubber and Yem Chio 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 Yem Chio 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 Yem Chio Co, you can compare the effects of market volatilities on Formosan Rubber and Yem Chio 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 Yem Chio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and Yem Chio.
Diversification Opportunities for Formosan Rubber and Yem Chio
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Formosan and Yem is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group and Yem Chio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yem Chio 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 Yem Chio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yem Chio has no effect on the direction of Formosan Rubber i.e., Formosan Rubber and Yem Chio go up and down completely randomly.
Pair Corralation between Formosan Rubber and Yem Chio
Assuming the 90 days trading horizon Formosan Rubber is expected to generate 1.08 times less return on investment than Yem Chio. But when comparing it to its historical volatility, Formosan Rubber Group is 1.47 times less risky than Yem Chio. It trades about 0.21 of its potential returns per unit of risk. Yem Chio Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,750 in Yem Chio Co on December 1, 2024 and sell it today you would earn a total of 40.00 from holding Yem Chio Co or generate 2.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Rubber Group vs. Yem Chio Co
Performance |
| Timeline |
| Formosan Rubber Group |
| Yem Chio |
Formosan Rubber and Yem Chio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Rubber and Yem Chio
The main advantage of trading using opposite Formosan Rubber and Yem Chio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Rubber position performs unexpectedly, Yem Chio 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 Yem Chio will offset losses from the drop in Yem Chio'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 |
| Yem Chio vs. USI Corp | Yem Chio vs. Asia Polymer Corp | Yem Chio vs. Sincere Navigation Corp | Yem Chio vs. Lealea Enterprise Co |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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