Correlation Between OBI Pharma and Formosa Taffeta
Can any of the company-specific risk be diversified away by investing in both OBI Pharma and Formosa Taffeta 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 OBI Pharma and Formosa Taffeta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OBI Pharma and Formosa Taffeta Co, you can compare the effects of market volatilities on OBI Pharma and Formosa Taffeta 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 OBI Pharma with a short position of Formosa Taffeta. Check out your portfolio center. Please also check ongoing floating volatility patterns of OBI Pharma and Formosa Taffeta.
Diversification Opportunities for OBI Pharma and Formosa Taffeta
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between OBI and Formosa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding OBI Pharma and Formosa Taffeta Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Taffeta and OBI Pharma 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 OBI Pharma are associated (or correlated) with Formosa Taffeta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Taffeta has no effect on the direction of OBI Pharma i.e., OBI Pharma and Formosa Taffeta go up and down completely randomly.
Pair Corralation between OBI Pharma and Formosa Taffeta
Assuming the 90 days trading horizon OBI Pharma is expected to generate 2.29 times more return on investment than Formosa Taffeta. However, OBI Pharma is 2.29 times more volatile than Formosa Taffeta Co. It trades about -0.01 of its potential returns per unit of risk. Formosa Taffeta Co is currently generating about -0.06 per unit of risk. If you would invest 7,750 in OBI Pharma on August 26, 2024 and sell it today you would lose (1,450) from holding OBI Pharma or give up 18.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
OBI Pharma vs. Formosa Taffeta Co
Performance |
| Timeline |
| OBI Pharma |
| Formosa Taffeta |
OBI Pharma and Formosa Taffeta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OBI Pharma and Formosa Taffeta
The main advantage of trading using opposite OBI Pharma and Formosa Taffeta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OBI Pharma position performs unexpectedly, Formosa Taffeta 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 Taffeta will offset losses from the drop in Formosa Taffeta's long position.| OBI Pharma vs. TaiMed Biologics | OBI Pharma vs. PharmaEngine | OBI Pharma vs. Medigen Biotechnology | OBI Pharma vs. TTY Biopharm Co |
| Formosa Taffeta vs. Taiwan Semiconductor Manufacturing | Formosa Taffeta vs. Hon Hai Precision | Formosa Taffeta vs. MediaTek | Formosa Taffeta vs. Chunghwa Telecom Co |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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