Correlation Between Formosa International and Far EasTone
Can any of the company-specific risk be diversified away by investing in both Formosa International and Far EasTone 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 Far EasTone 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 Far EasTone Telecommunications, you can compare the effects of market volatilities on Formosa International and Far EasTone 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 Far EasTone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa International and Far EasTone.
Diversification Opportunities for Formosa International and Far EasTone
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Formosa and Far is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Formosa International Hotels and Far EasTone Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far EasTone Telecomm 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 Far EasTone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far EasTone Telecomm has no effect on the direction of Formosa International i.e., Formosa International and Far EasTone go up and down completely randomly.
Pair Corralation between Formosa International and Far EasTone
Assuming the 90 days trading horizon Formosa International Hotels is expected to under-perform the Far EasTone. But the stock apears to be less risky and, when comparing its historical volatility, Formosa International Hotels is 1.85 times less risky than Far EasTone. The stock trades about -0.32 of its potential returns per unit of risk. The Far EasTone Telecommunications is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8,860 in Far EasTone Telecommunications on September 3, 2024 and sell it today you would earn a total of 130.00 from holding Far EasTone Telecommunications or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa International Hotels vs. Far EasTone Telecommunications
Performance |
| Timeline |
| Formosa International |
| Far EasTone Telecomm |
Formosa International and Far EasTone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa International and Far EasTone
The main advantage of trading using opposite Formosa International and Far EasTone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa International position performs unexpectedly, Far EasTone 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 Far EasTone will offset losses from the drop in Far EasTone's long position.| Formosa International vs. Tainan Spinning Co | Formosa International vs. Chia Her Industrial | Formosa International vs. WiseChip Semiconductor | Formosa International vs. Novatek Microelectronics Corp |
| Far EasTone vs. China Steel Corp | Far EasTone vs. Formosa Plastics Corp | Far EasTone vs. Cathay Financial Holding | Far EasTone vs. Fubon Financial Holding |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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