Correlation Between WIN Semiconductors and Formosa Petrochemical
Can any of the company-specific risk be diversified away by investing in both WIN Semiconductors and Formosa Petrochemical 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 WIN Semiconductors and Formosa Petrochemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WIN Semiconductors and Formosa Petrochemical Corp, you can compare the effects of market volatilities on WIN Semiconductors and Formosa Petrochemical 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 WIN Semiconductors with a short position of Formosa Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIN Semiconductors and Formosa Petrochemical.
Diversification Opportunities for WIN Semiconductors and Formosa Petrochemical
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WIN and Formosa is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding WIN Semiconductors and Formosa Petrochemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Petrochemical and WIN Semiconductors 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 WIN Semiconductors are associated (or correlated) with Formosa Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Petrochemical has no effect on the direction of WIN Semiconductors i.e., WIN Semiconductors and Formosa Petrochemical go up and down completely randomly.
Pair Corralation between WIN Semiconductors and Formosa Petrochemical
Assuming the 90 days trading horizon WIN Semiconductors is expected to under-perform the Formosa Petrochemical. But the stock apears to be less risky and, when comparing its historical volatility, WIN Semiconductors is 1.19 times less risky than Formosa Petrochemical. The stock trades about -0.19 of its potential returns per unit of risk. The Formosa Petrochemical Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,530 in Formosa Petrochemical Corp on October 26, 2024 and sell it today you would earn a total of 135.00 from holding Formosa Petrochemical Corp or generate 3.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WIN Semiconductors vs. Formosa Petrochemical Corp
Performance |
| Timeline |
| WIN Semiconductors |
| Formosa Petrochemical |
WIN Semiconductors and Formosa Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WIN Semiconductors and Formosa Petrochemical
The main advantage of trading using opposite WIN Semiconductors and Formosa Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIN Semiconductors position performs unexpectedly, Formosa Petrochemical 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 Petrochemical will offset losses from the drop in Formosa Petrochemical's long position.| WIN Semiconductors vs. LARGAN Precision Co | WIN Semiconductors vs. GlobalWafers Co | WIN Semiconductors vs. Novatek Microelectronics Corp | WIN Semiconductors vs. Advanced Wireless Semiconductor |
| Formosa Petrochemical vs. WIN Semiconductors | Formosa Petrochemical vs. Advanced Wireless Semiconductor | Formosa Petrochemical vs. C Media Electronics | Formosa Petrochemical 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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