Correlation Between Accton Technology and Formosa Plastics
Can any of the company-specific risk be diversified away by investing in both Accton Technology 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 Accton Technology and Formosa Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Accton Technology Corp and Formosa Plastics Corp, you can compare the effects of market volatilities on Accton Technology 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 Accton Technology with a short position of Formosa Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Accton Technology and Formosa Plastics.
Diversification Opportunities for Accton Technology and Formosa Plastics
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Accton and Formosa is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Accton Technology Corp 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 Accton Technology 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 Accton Technology Corp 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 Accton Technology i.e., Accton Technology and Formosa Plastics go up and down completely randomly.
Pair Corralation between Accton Technology and Formosa Plastics
Assuming the 90 days trading horizon Accton Technology Corp is expected to generate 0.67 times more return on investment than Formosa Plastics. However, Accton Technology Corp is 1.5 times less risky than Formosa Plastics. It trades about -0.01 of its potential returns per unit of risk. Formosa Plastics Corp is currently generating about -0.02 per unit of risk. If you would invest 74,200 in Accton Technology Corp on October 20, 2024 and sell it today you would lose (800.00) from holding Accton Technology Corp or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Accton Technology Corp vs. Formosa Plastics Corp
Performance |
| Timeline |
| Accton Technology Corp |
| Formosa Plastics Corp |
Accton Technology and Formosa Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Accton Technology and Formosa Plastics
The main advantage of trading using opposite Accton Technology and Formosa Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Accton Technology 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.| Accton Technology vs. D Link Corp | Accton Technology vs. Realtek Semiconductor Corp | Accton Technology vs. Winbond Electronics Corp | Accton Technology vs. Compal Electronics |
| 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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