Correlation Between United Microelectronics and Formosa Plastics
Can any of the company-specific risk be diversified away by investing in both United Microelectronics 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 United Microelectronics and Formosa Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Microelectronics and Formosa Plastics Corp, you can compare the effects of market volatilities on United Microelectronics 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 United Microelectronics with a short position of Formosa Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Microelectronics and Formosa Plastics.
Diversification Opportunities for United Microelectronics and Formosa Plastics
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Formosa is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics 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 United Microelectronics 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 United Microelectronics 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 United Microelectronics i.e., United Microelectronics and Formosa Plastics go up and down completely randomly.
Pair Corralation between United Microelectronics and Formosa Plastics
Assuming the 90 days trading horizon United Microelectronics is expected to generate 1.33 times more return on investment than Formosa Plastics. However, United Microelectronics is 1.33 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 -0.11 per unit of risk. If you would invest 4,350 in United Microelectronics on August 30, 2024 and sell it today you would earn a total of 90.00 from holding United Microelectronics or generate 2.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Microelectronics vs. Formosa Plastics Corp
Performance |
| Timeline |
| United Microelectronics |
| Formosa Plastics Corp |
United Microelectronics and Formosa Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Microelectronics and Formosa Plastics
The main advantage of trading using opposite United Microelectronics and Formosa Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Microelectronics 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.| United Microelectronics vs. AU Optronics | United Microelectronics vs. Macronix International Co | United Microelectronics vs. Winbond Electronics Corp | United Microelectronics vs. Hon Hai Precision |
| Formosa Plastics vs. Nan Ya Plastics | Formosa Plastics vs. Formosa Chemicals Fibre | Formosa Plastics vs. China Steel Corp | Formosa Plastics vs. Formosa Petrochemical Corp |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |