Correlation Between Formosa International and Jia Jie
Can any of the company-specific risk be diversified away by investing in both Formosa International and Jia Jie 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 Formosa International and Jia Jie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa International Hotels and Jia Jie Biomedical, you can compare the effects of market volatilities on Formosa International and Jia Jie 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 Formosa International with a short position of Jia Jie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa International and Jia Jie.
Diversification Opportunities for Formosa International and Jia Jie
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formosa and Jia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Formosa International Hotels and Jia Jie Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jia Jie Biomedical and Formosa International 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 Formosa International Hotels are associated (or correlated) with Jia Jie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jia Jie Biomedical has no effect on the direction of Formosa International i.e., Formosa International and Jia Jie go up and down completely randomly.
Pair Corralation between Formosa International and Jia Jie
Assuming the 90 days trading horizon Formosa International Hotels is expected to generate 0.42 times more return on investment than Jia Jie. However, Formosa International Hotels is 2.39 times less risky than Jia Jie. It trades about -0.01 of its potential returns per unit of risk. Jia Jie Biomedical is currently generating about -0.23 per unit of risk. If you would invest 19,450 in Formosa International Hotels on September 19, 2024 and sell it today you would lose (50.00) from holding Formosa International Hotels or give up 0.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa International Hotels vs. Jia Jie Biomedical
Performance |
| Timeline |
| Formosa International |
| Jia Jie Biomedical |
Formosa International and Jia Jie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa International and Jia Jie
The main advantage of trading using opposite Formosa International and Jia Jie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa International position performs unexpectedly, Jia Jie 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 Jia Jie will offset losses from the drop in Jia Jie's long position.| Formosa International vs. Feng Tay Enterprises | Formosa International vs. Ruentex Development Co | Formosa International vs. WiseChip Semiconductor | Formosa International vs. Novatek Microelectronics Corp |
| Jia Jie vs. Nankang Rubber Tire | Jia Jie vs. General Plastic Industrial | Jia Jie vs. Tigerair Taiwan Co | Jia Jie vs. Formosa International Hotels |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |