Correlation Between Formosa International and Holiday Entertainment
Can any of the company-specific risk be diversified away by investing in both Formosa International and Holiday Entertainment 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 Holiday Entertainment 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 Holiday Entertainment Co, you can compare the effects of market volatilities on Formosa International and Holiday Entertainment 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 Holiday Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa International and Holiday Entertainment.
Diversification Opportunities for Formosa International and Holiday Entertainment
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formosa and Holiday is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Formosa International Hotels and Holiday Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holiday Entertainment 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 Holiday Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holiday Entertainment has no effect on the direction of Formosa International i.e., Formosa International and Holiday Entertainment go up and down completely randomly.
Pair Corralation between Formosa International and Holiday Entertainment
Assuming the 90 days trading horizon Formosa International Hotels is expected to under-perform the Holiday Entertainment. In addition to that, Formosa International is 1.49 times more volatile than Holiday Entertainment Co. It trades about -0.11 of its total potential returns per unit of risk. Holiday Entertainment Co is currently generating about -0.11 per unit of volatility. If you would invest 8,290 in Holiday Entertainment Co on September 3, 2024 and sell it today you would lose (330.00) from holding Holiday Entertainment Co or give up 3.98% 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. Holiday Entertainment Co
Performance |
| Timeline |
| Formosa International |
| Holiday Entertainment |
Formosa International and Holiday Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa International and Holiday Entertainment
The main advantage of trading using opposite Formosa International and Holiday Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa International position performs unexpectedly, Holiday Entertainment 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 Holiday Entertainment will offset losses from the drop in Holiday Entertainment'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 |
| Holiday Entertainment vs. Tainan Spinning Co | Holiday Entertainment vs. Chia Her Industrial | Holiday Entertainment vs. WiseChip Semiconductor | Holiday Entertainment vs. Novatek Microelectronics Corp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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