Correlation Between Formosan Rubber and Silicon Power
Can any of the company-specific risk be diversified away by investing in both Formosan Rubber and Silicon Power 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 Silicon Power 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 Silicon Power Computer, you can compare the effects of market volatilities on Formosan Rubber and Silicon Power 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 Silicon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and Silicon Power.
Diversification Opportunities for Formosan Rubber and Silicon Power
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Formosan and Silicon is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group and Silicon Power Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Power Computer 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 Silicon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Power Computer has no effect on the direction of Formosan Rubber i.e., Formosan Rubber and Silicon Power go up and down completely randomly.
Pair Corralation between Formosan Rubber and Silicon Power
Assuming the 90 days trading horizon Formosan Rubber is expected to generate 9.65 times less return on investment than Silicon Power. But when comparing it to its historical volatility, Formosan Rubber Group is 2.1 times less risky than Silicon Power. It trades about 0.02 of its potential returns per unit of risk. Silicon Power Computer is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,080 in Silicon Power Computer on October 25, 2024 and sell it today you would earn a total of 65.00 from holding Silicon Power Computer or generate 2.11% 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. Silicon Power Computer
Performance |
| Timeline |
| Formosan Rubber Group |
| Silicon Power Computer |
Formosan Rubber and Silicon Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosan Rubber and Silicon Power
The main advantage of trading using opposite Formosan Rubber and Silicon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Rubber position performs unexpectedly, Silicon Power 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 Silicon Power will offset losses from the drop in Silicon Power'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 |
| Silicon Power vs. X Legend Entertainment Co | Silicon Power vs. Hwa Fong Rubber | Silicon Power vs. Formosan Rubber Group | Silicon Power vs. C Media Electronics |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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