Correlation Between Formosa Sumco and Motech Industries
Can any of the company-specific risk be diversified away by investing in both Formosa Sumco and Motech Industries 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 Motech Industries 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 Motech Industries Co, you can compare the effects of market volatilities on Formosa Sumco and Motech Industries 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 Motech Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Sumco and Motech Industries.
Diversification Opportunities for Formosa Sumco and Motech Industries
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Formosa and Motech is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Sumco Technology and Motech Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motech Industries 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 Motech Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motech Industries has no effect on the direction of Formosa Sumco i.e., Formosa Sumco and Motech Industries go up and down completely randomly.
Pair Corralation between Formosa Sumco and Motech Industries
Assuming the 90 days trading horizon Formosa Sumco Technology is expected to under-perform the Motech Industries. In addition to that, Formosa Sumco is 1.11 times more volatile than Motech Industries Co. It trades about -0.22 of its total potential returns per unit of risk. Motech Industries Co is currently generating about -0.09 per unit of volatility. If you would invest 2,620 in Motech Industries Co on August 30, 2024 and sell it today you would lose (170.00) from holding Motech Industries Co or give up 6.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Sumco Technology vs. Motech Industries Co
Performance |
| Timeline |
| Formosa Sumco Technology |
| Motech Industries |
Formosa Sumco and Motech Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Sumco and Motech Industries
The main advantage of trading using opposite Formosa Sumco and Motech Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Sumco position performs unexpectedly, Motech Industries 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 Motech Industries will offset losses from the drop in Motech Industries' long position.The idea behind Formosa Sumco Technology and Motech Industries Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Motech Industries vs. United Renewable Energy | Motech Industries vs. Sino American Silicon Products | Motech Industries vs. Wafer Works | Motech Industries vs. Gigasolar Materials |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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