Correlation Between Formosan Rubber and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Formosan Rubber and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Formosan Rubber and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosan Rubber and Dow Jones.
Diversification Opportunities for Formosan Rubber and Dow Jones
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosan and Dow is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Formosan Rubber Group and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Formosan Rubber i.e., Formosan Rubber and Dow Jones go up and down completely randomly.
Pair Corralation between Formosan Rubber and Dow Jones
Assuming the 90 days trading horizon Formosan Rubber is expected to generate 389.78 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Formosan Rubber Group is 2.12 times less risky than Dow Jones. It trades about 0.0 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Formosan Rubber Group vs. Dow Jones Industrial
Performance |
| Timeline |
Formosan Rubber and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Formosan Rubber Group
Pair trading matchups for Formosan Rubber
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Formosan Rubber and Dow Jones
The main advantage of trading using opposite Formosan Rubber and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosan Rubber position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Formosan Rubber vs. Basso Industry Corp | Formosan Rubber vs. Chung Hsin Electric Machinery | Formosan Rubber vs. TYC Brother Industrial | Formosan Rubber vs. TECO Electric Machinery |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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