Correlation Between President Chain and Formosa Chemicals
Can any of the company-specific risk be diversified away by investing in both President Chain and Formosa Chemicals 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 President Chain and Formosa Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between President Chain Store and Formosa Chemicals Fibre, you can compare the effects of market volatilities on President Chain and Formosa Chemicals 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 President Chain with a short position of Formosa Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of President Chain and Formosa Chemicals.
Diversification Opportunities for President Chain and Formosa Chemicals
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between President and Formosa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding President Chain Store and Formosa Chemicals Fibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Chemicals Fibre and President Chain 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 President Chain Store are associated (or correlated) with Formosa Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Chemicals Fibre has no effect on the direction of President Chain i.e., President Chain and Formosa Chemicals go up and down completely randomly.
Pair Corralation between President Chain and Formosa Chemicals
Assuming the 90 days trading horizon President Chain Store is expected to under-perform the Formosa Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, President Chain Store is 5.25 times less risky than Formosa Chemicals. The stock trades about -0.35 of its potential returns per unit of risk. The Formosa Chemicals Fibre is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,880 in Formosa Chemicals Fibre on October 26, 2024 and sell it today you would lose (70.00) from holding Formosa Chemicals Fibre or give up 2.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
President Chain Store vs. Formosa Chemicals Fibre
Performance |
| Timeline |
| President Chain Store |
| Formosa Chemicals Fibre |
President Chain and Formosa Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with President Chain and Formosa Chemicals
The main advantage of trading using opposite President Chain and Formosa Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if President Chain position performs unexpectedly, Formosa Chemicals 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 Formosa Chemicals will offset losses from the drop in Formosa Chemicals' long position.| President Chain vs. Uni President Enterprises Corp | President Chain vs. Formosa Plastics Corp | President Chain vs. Chunghwa Telecom Co | President Chain vs. Fubon Financial Holding |
| Formosa Chemicals vs. Nan Ya Plastics | Formosa Chemicals vs. China Steel Corp | Formosa Chemicals vs. Formosa Petrochemical Corp | Formosa Chemicals vs. Cathay 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |