Correlation Between Formosa International and CKM Building
Can any of the company-specific risk be diversified away by investing in both Formosa International and CKM Building 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 CKM Building 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 CKM Building Material, you can compare the effects of market volatilities on Formosa International and CKM Building 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 CKM Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa International and CKM Building.
Diversification Opportunities for Formosa International and CKM Building
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Formosa and CKM is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Formosa International Hotels and CKM Building Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKM Building Material 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 CKM Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKM Building Material has no effect on the direction of Formosa International i.e., Formosa International and CKM Building go up and down completely randomly.
Pair Corralation between Formosa International and CKM Building
Assuming the 90 days trading horizon Formosa International Hotels is expected to under-perform the CKM Building. But the stock apears to be less risky and, when comparing its historical volatility, Formosa International Hotels is 2.11 times less risky than CKM Building. The stock trades about -0.32 of its potential returns per unit of risk. The CKM Building Material is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 3,465 in CKM Building Material on September 3, 2024 and sell it today you would lose (85.00) from holding CKM Building Material or give up 2.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa International Hotels vs. CKM Building Material
Performance |
| Timeline |
| Formosa International |
| CKM Building Material |
Formosa International and CKM Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa International and CKM Building
The main advantage of trading using opposite Formosa International and CKM Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa International position performs unexpectedly, CKM Building 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 CKM Building will offset losses from the drop in CKM Building'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 |
| CKM Building vs. Sunspring Metal Corp | CKM Building vs. Champion Building Materials | CKM Building vs. Ruentex Development Co | CKM Building vs. Symtek Automation Asia |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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