Correlation Between Advantech and Formosa Electronic
Can any of the company-specific risk be diversified away by investing in both Advantech and Formosa Electronic 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 Advantech and Formosa Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantech Co and Formosa Electronic Industries, you can compare the effects of market volatilities on Advantech and Formosa Electronic 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 Advantech with a short position of Formosa Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Formosa Electronic.
Diversification Opportunities for Advantech and Formosa Electronic
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Advantech and Formosa is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Formosa Electronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Electronic and Advantech 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 Advantech Co are associated (or correlated) with Formosa Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Electronic has no effect on the direction of Advantech i.e., Advantech and Formosa Electronic go up and down completely randomly.
Pair Corralation between Advantech and Formosa Electronic
Assuming the 90 days trading horizon Advantech is expected to generate 1.25 times less return on investment than Formosa Electronic. But when comparing it to its historical volatility, Advantech Co is 1.41 times less risky than Formosa Electronic. It trades about 0.02 of its potential returns per unit of risk. Formosa Electronic Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 4,488 in Formosa Electronic Industries on August 30, 2024 and sell it today you would earn a total of 132.00 from holding Formosa Electronic Industries or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Advantech Co vs. Formosa Electronic Industries
Performance |
| Timeline |
| Advantech |
| Formosa Electronic |
Advantech and Formosa Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantech and Formosa Electronic
The main advantage of trading using opposite Advantech and Formosa Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantech position performs unexpectedly, Formosa Electronic 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 Electronic will offset losses from the drop in Formosa Electronic's long position.| Advantech vs. Delta Electronics | Advantech vs. Quanta Computer | Advantech vs. Realtek Semiconductor Corp | Advantech vs. President Chain Store |
| Formosa Electronic vs. Info Tek | Formosa Electronic vs. Gallant Precision Machining | Formosa Electronic vs. Walton Advanced Engineering | Formosa Electronic vs. Cheng Mei Materials |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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