Correlation Between Formosan Rubber and Tainet Communication
Can any of the company-specific risk be diversified away by investing in both Formosan Rubber and Tainet Communication 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 Tainet Communication 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 Tainet Communication System, you can compare the effects of market volatilities on Formosan Rubber and Tainet Communication 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 Tainet Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and Tainet Communication.
Diversification Opportunities for Formosan Rubber and Tainet Communication
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Formosan and Tainet is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group and Tainet Communication System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainet Communication 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 Tainet Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainet Communication has no effect on the direction of Formosan Rubber i.e., Formosan Rubber and Tainet Communication go up and down completely randomly.
Pair Corralation between Formosan Rubber and Tainet Communication
Assuming the 90 days trading horizon Formosan Rubber Group is expected to generate 0.46 times more return on investment than Tainet Communication. However, Formosan Rubber Group is 2.15 times less risky than Tainet Communication. It trades about 0.04 of its potential returns per unit of risk. Tainet Communication System is currently generating about 0.01 per unit of risk. If you would invest 2,580 in Formosan Rubber Group on November 3, 2024 and sell it today you would earn a total of 10.00 from holding Formosan Rubber Group or generate 0.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosan Rubber Group vs. Tainet Communication System
Performance |
| Timeline |
| Formosan Rubber Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Tainet Communication |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Formosan Rubber and Tainet Communication Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Rubber and Tainet Communication
The main advantage of trading using opposite Formosan Rubber and Tainet Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Rubber position performs unexpectedly, Tainet Communication 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 Tainet Communication will offset losses from the drop in Tainet Communication's long position.The idea behind Formosan Rubber Group and Tainet Communication System pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |