Correlation Between Formosa International and Ma Kuang
Can any of the company-specific risk be diversified away by investing in both Formosa International and Ma Kuang 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 Ma Kuang 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 Ma Kuang Healthcare, you can compare the effects of market volatilities on Formosa International and Ma Kuang 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 Ma Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa International and Ma Kuang.
Diversification Opportunities for Formosa International and Ma Kuang
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Formosa and 4139 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Formosa International Hotels and Ma Kuang Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ma Kuang Healthcare 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 Ma Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ma Kuang Healthcare has no effect on the direction of Formosa International i.e., Formosa International and Ma Kuang go up and down completely randomly.
Pair Corralation between Formosa International and Ma Kuang
Assuming the 90 days trading horizon Formosa International Hotels is expected to under-perform the Ma Kuang. But the stock apears to be less risky and, when comparing its historical volatility, Formosa International Hotels is 1.45 times less risky than Ma Kuang. The stock trades about -0.07 of its potential returns per unit of risk. The Ma Kuang Healthcare is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,670 in Ma Kuang Healthcare on September 2, 2024 and sell it today you would lose (695.00) from holding Ma Kuang Healthcare or give up 18.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa International Hotels vs. Ma Kuang Healthcare
Performance |
| Timeline |
| Formosa International |
| Ma Kuang Healthcare |
Formosa International and Ma Kuang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa International and Ma Kuang
The main advantage of trading using opposite Formosa International and Ma Kuang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa International position performs unexpectedly, Ma Kuang 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 Ma Kuang will offset losses from the drop in Ma Kuang's long position.| Formosa International vs. President Chain Store | Formosa International vs. Uni President Enterprises Corp | Formosa International vs. Ambassador Hotel | Formosa International vs. Hotai Motor Co |
| Ma Kuang vs. CHC Healthcare Group | Ma Kuang vs. SS Healthcare Holding | Ma Kuang vs. Chi Hua Fitness | Ma Kuang vs. Chia Yi Steel |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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