Correlation Between Formosa International and Sun Sea
Can any of the company-specific risk be diversified away by investing in both Formosa International and Sun Sea 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 Sun Sea 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 Sun Sea Construction, you can compare the effects of market volatilities on Formosa International and Sun Sea 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 Sun Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa International and Sun Sea.
Diversification Opportunities for Formosa International and Sun Sea
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosa and Sun is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Formosa International Hotels and Sun Sea Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Sea Construction 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 Sun Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Sea Construction has no effect on the direction of Formosa International i.e., Formosa International and Sun Sea go up and down completely randomly.
Pair Corralation between Formosa International and Sun Sea
Assuming the 90 days trading horizon Formosa International Hotels is expected to generate 0.65 times more return on investment than Sun Sea. However, Formosa International Hotels is 1.54 times less risky than Sun Sea. It trades about 0.11 of its potential returns per unit of risk. Sun Sea Construction is currently generating about -0.29 per unit of risk. If you would invest 19,450 in Formosa International Hotels on November 28, 2024 and sell it today you would earn a total of 200.00 from holding Formosa International Hotels or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa International Hotels vs. Sun Sea Construction
Performance |
| Timeline |
| Formosa International |
| Sun Sea Construction |
Formosa International and Sun Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa International and Sun Sea
The main advantage of trading using opposite Formosa International and Sun Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa International position performs unexpectedly, Sun Sea 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 Sun Sea will offset losses from the drop in Sun Sea'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 |
| Sun Sea vs. Prime Oil Chemical | Sun Sea vs. Sporton International | Sun Sea vs. Oriental Union Chemical | Sun Sea vs. Asmedia Technology |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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