Correlation Between First Hotel and Microelectronics
Can any of the company-specific risk be diversified away by investing in both First Hotel and Microelectronics 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 First Hotel and Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Hotel Co and Microelectronics Technology, you can compare the effects of market volatilities on First Hotel and Microelectronics 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 First Hotel with a short position of Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Hotel and Microelectronics.
Diversification Opportunities for First Hotel and Microelectronics
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Microelectronics is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Hotel Co and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and First Hotel 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 First Hotel Co are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of First Hotel i.e., First Hotel and Microelectronics go up and down completely randomly.
Pair Corralation between First Hotel and Microelectronics
Assuming the 90 days trading horizon First Hotel Co is expected to generate 0.52 times more return on investment than Microelectronics. However, First Hotel Co is 1.93 times less risky than Microelectronics. It trades about 0.01 of its potential returns per unit of risk. Microelectronics Technology is currently generating about -0.01 per unit of risk. If you would invest 1,420 in First Hotel Co on September 3, 2024 and sell it today you would earn a total of 50.00 from holding First Hotel Co or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Hotel Co vs. Microelectronics Technology
Performance |
| Timeline |
| First Hotel |
| Microelectronics Tec |
First Hotel and Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Hotel and Microelectronics
The main advantage of trading using opposite First Hotel and Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Hotel position performs unexpectedly, Microelectronics 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 Microelectronics will offset losses from the drop in Microelectronics' long position.| First Hotel vs. Tainan Spinning Co | First Hotel vs. Chia Her Industrial | First Hotel vs. WiseChip Semiconductor | First Hotel vs. Novatek Microelectronics Corp |
| Microelectronics vs. Taiwan Semiconductor Manufacturing | Microelectronics vs. Yang Ming Marine | Microelectronics vs. ASE Industrial Holding | Microelectronics vs. AU Optronics |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |