Correlation Between Formosa Sumco and LandMark Optoelectronics
Can any of the company-specific risk be diversified away by investing in both Formosa Sumco and LandMark Optoelectronics 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 Sumco and LandMark Optoelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Sumco Technology and LandMark Optoelectronics, you can compare the effects of market volatilities on Formosa Sumco and LandMark Optoelectronics 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 Sumco with a short position of LandMark Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Sumco and LandMark Optoelectronics.
Diversification Opportunities for Formosa Sumco and LandMark Optoelectronics
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Formosa and LandMark is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Sumco Technology and LandMark Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LandMark Optoelectronics and Formosa Sumco 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 Sumco Technology are associated (or correlated) with LandMark Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LandMark Optoelectronics has no effect on the direction of Formosa Sumco i.e., Formosa Sumco and LandMark Optoelectronics go up and down completely randomly.
Pair Corralation between Formosa Sumco and LandMark Optoelectronics
Assuming the 90 days trading horizon Formosa Sumco Technology is expected to under-perform the LandMark Optoelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Sumco Technology is 1.84 times less risky than LandMark Optoelectronics. The stock trades about -0.02 of its potential returns per unit of risk. The LandMark Optoelectronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,713 in LandMark Optoelectronics on September 2, 2024 and sell it today you would earn a total of 22,587 from holding LandMark Optoelectronics or generate 192.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Sumco Technology vs. LandMark Optoelectronics
Performance |
| Timeline |
| Formosa Sumco Technology |
| LandMark Optoelectronics |
Formosa Sumco and LandMark Optoelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Sumco and LandMark Optoelectronics
The main advantage of trading using opposite Formosa Sumco and LandMark Optoelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Sumco position performs unexpectedly, LandMark Optoelectronics 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 LandMark Optoelectronics will offset losses from the drop in LandMark Optoelectronics' long position.| Formosa Sumco vs. GlobalWafers Co | Formosa Sumco vs. Kinsus Interconnect Technology | Formosa Sumco vs. Nanya Technology Corp | Formosa Sumco vs. Wafer Works |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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