Correlation Between CSBC Corp and Formosa Plastics
Can any of the company-specific risk be diversified away by investing in both CSBC Corp and Formosa Plastics 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 CSBC Corp and Formosa Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSBC Corp Taiwan and Formosa Plastics Corp, you can compare the effects of market volatilities on CSBC Corp and Formosa Plastics 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 CSBC Corp with a short position of Formosa Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSBC Corp and Formosa Plastics.
Diversification Opportunities for CSBC Corp and Formosa Plastics
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CSBC and Formosa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CSBC Corp Taiwan and Formosa Plastics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Plastics Corp and CSBC Corp 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 CSBC Corp Taiwan are associated (or correlated) with Formosa Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Plastics Corp has no effect on the direction of CSBC Corp i.e., CSBC Corp and Formosa Plastics go up and down completely randomly.
Pair Corralation between CSBC Corp and Formosa Plastics
Assuming the 90 days trading horizon CSBC Corp Taiwan is expected to generate 1.38 times more return on investment than Formosa Plastics. However, CSBC Corp is 1.38 times more volatile than Formosa Plastics Corp. It trades about -0.01 of its potential returns per unit of risk. Formosa Plastics Corp is currently generating about -0.12 per unit of risk. If you would invest 1,955 in CSBC Corp Taiwan on September 2, 2024 and sell it today you would lose (290.00) from holding CSBC Corp Taiwan or give up 14.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSBC Corp Taiwan vs. Formosa Plastics Corp
Performance |
| Timeline |
| CSBC Corp Taiwan |
| Formosa Plastics Corp |
CSBC Corp and Formosa Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSBC Corp and Formosa Plastics
The main advantage of trading using opposite CSBC Corp and Formosa Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSBC Corp position performs unexpectedly, Formosa Plastics 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 Formosa Plastics will offset losses from the drop in Formosa Plastics' long position.| CSBC Corp vs. Sincere Navigation Corp | CSBC Corp vs. Evergreen International Storage | CSBC Corp vs. First Steamship Co | CSBC Corp vs. Mercuries Life Insurance |
| Formosa Plastics vs. Basso Industry Corp | Formosa Plastics vs. Chung Hsin Electric Machinery | Formosa Plastics vs. TYC Brother Industrial | Formosa Plastics vs. TECO Electric Machinery |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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