Correlation Between LARGAN Precision and Formosa Optical
Can any of the company-specific risk be diversified away by investing in both LARGAN Precision and Formosa Optical 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 LARGAN Precision and Formosa Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LARGAN Precision Co and Formosa Optical Technology, you can compare the effects of market volatilities on LARGAN Precision and Formosa Optical 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 LARGAN Precision with a short position of Formosa Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of LARGAN Precision and Formosa Optical.
Diversification Opportunities for LARGAN Precision and Formosa Optical
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LARGAN and Formosa is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and Formosa Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Optical Tech and LARGAN Precision 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 LARGAN Precision Co are associated (or correlated) with Formosa Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Optical Tech has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and Formosa Optical go up and down completely randomly.
Pair Corralation between LARGAN Precision and Formosa Optical
Assuming the 90 days trading horizon LARGAN Precision Co is expected to generate 2.56 times more return on investment than Formosa Optical. However, LARGAN Precision is 2.56 times more volatile than Formosa Optical Technology. It trades about 0.19 of its potential returns per unit of risk. Formosa Optical Technology is currently generating about 0.05 per unit of risk. If you would invest 255,000 in LARGAN Precision Co on October 24, 2024 and sell it today you would earn a total of 21,500 from holding LARGAN Precision Co or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
LARGAN Precision Co vs. Formosa Optical Technology
Performance |
| Timeline |
| LARGAN Precision |
| Formosa Optical Tech |
LARGAN Precision and Formosa Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LARGAN Precision and Formosa Optical
The main advantage of trading using opposite LARGAN Precision and Formosa Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LARGAN Precision position performs unexpectedly, Formosa Optical 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 Optical will offset losses from the drop in Formosa Optical's long position.| LARGAN Precision vs. MediaTek | LARGAN Precision vs. Hon Hai Precision | LARGAN Precision vs. Delta Electronics | LARGAN Precision vs. Catcher Technology Co |
| Formosa Optical vs. Grand Pacific Petrochemical | Formosa Optical vs. Taiwan Speciality Chemicals | Formosa Optical vs. SS Healthcare Holding | Formosa Optical vs. Phoenix Silicon International |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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