Correlation Between Taiwan High and Formosa Optical
Can any of the company-specific risk be diversified away by investing in both Taiwan High and Formosa Optical 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 Taiwan High and Formosa Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan High Speed and Formosa Optical Technology, you can compare the effects of market volatilities on Taiwan High and Formosa Optical 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 Taiwan High with a short position of Formosa Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan High and Formosa Optical.
Diversification Opportunities for Taiwan High and Formosa Optical
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Taiwan and Formosa is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan High Speed and Formosa Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Optical Tech and Taiwan High 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 Taiwan High Speed are associated (or correlated) with Formosa Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Optical Tech has no effect on the direction of Taiwan High i.e., Taiwan High and Formosa Optical go up and down completely randomly.
Pair Corralation between Taiwan High and Formosa Optical
Assuming the 90 days trading horizon Taiwan High Speed is expected to under-perform the Formosa Optical. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan High Speed is 1.27 times less risky than Formosa Optical. The stock trades about -0.05 of its potential returns per unit of risk. The Formosa Optical Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 9,919 in Formosa Optical Technology on September 3, 2024 and sell it today you would earn a total of 931.00 from holding Formosa Optical Technology or generate 9.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan High Speed vs. Formosa Optical Technology
Performance |
| Timeline |
| Taiwan High Speed |
| Formosa Optical Tech |
Taiwan High and Formosa Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan High and Formosa Optical
The main advantage of trading using opposite Taiwan High and Formosa Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan High position performs unexpectedly, Formosa Optical 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 Optical will offset losses from the drop in Formosa Optical's long position.| Taiwan High vs. Chunghwa Telecom Co | Taiwan High vs. ESUN Financial Holding | Taiwan High vs. Mega Financial Holding | Taiwan High vs. Taiwan Cement Corp |
| Formosa Optical vs. Tainan Spinning Co | Formosa Optical vs. Chia Her Industrial | Formosa Optical vs. WiseChip Semiconductor | Formosa Optical vs. Novatek Microelectronics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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