Correlation Between Elitegroup Computer and Formosa Chemicals
Can any of the company-specific risk be diversified away by investing in both Elitegroup Computer and Formosa Chemicals 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 Elitegroup Computer and Formosa Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elitegroup Computer Systems and Formosa Chemicals Fibre, you can compare the effects of market volatilities on Elitegroup Computer and Formosa Chemicals 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 Elitegroup Computer with a short position of Formosa Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elitegroup Computer and Formosa Chemicals.
Diversification Opportunities for Elitegroup Computer and Formosa Chemicals
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elitegroup and Formosa is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Elitegroup Computer Systems and Formosa Chemicals Fibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Chemicals Fibre and Elitegroup Computer 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 Elitegroup Computer Systems are associated (or correlated) with Formosa Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Chemicals Fibre has no effect on the direction of Elitegroup Computer i.e., Elitegroup Computer and Formosa Chemicals go up and down completely randomly.
Pair Corralation between Elitegroup Computer and Formosa Chemicals
Assuming the 90 days trading horizon Elitegroup Computer Systems is expected to generate 1.82 times more return on investment than Formosa Chemicals. However, Elitegroup Computer is 1.82 times more volatile than Formosa Chemicals Fibre. It trades about 0.01 of its potential returns per unit of risk. Formosa Chemicals Fibre is currently generating about -0.11 per unit of risk. If you would invest 2,310 in Elitegroup Computer Systems on September 4, 2024 and sell it today you would earn a total of 70.00 from holding Elitegroup Computer Systems or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Elitegroup Computer Systems vs. Formosa Chemicals Fibre
Performance |
| Timeline |
| Elitegroup Computer |
| Formosa Chemicals Fibre |
Elitegroup Computer and Formosa Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elitegroup Computer and Formosa Chemicals
The main advantage of trading using opposite Elitegroup Computer and Formosa Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elitegroup Computer position performs unexpectedly, Formosa Chemicals 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 Chemicals will offset losses from the drop in Formosa Chemicals' long position.| Elitegroup Computer vs. Micro Star International Co | Elitegroup Computer vs. Gigabyte Technology Co | Elitegroup Computer vs. Compal Electronics | Elitegroup Computer vs. VIA Technologies |
| Formosa Chemicals vs. Formosa Plastics Corp | Formosa Chemicals vs. Nan Ya Plastics | Formosa Chemicals vs. Formosa Petrochemical Corp | Formosa Chemicals vs. Cathay Financial Holding |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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