Correlation Between Parade Technologies and Formosan Union

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Can any of the company-specific risk be diversified away by investing in both Parade Technologies and Formosan Union 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 Parade Technologies and Formosan Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parade Technologies and Formosan Union Chemical, you can compare the effects of market volatilities on Parade Technologies and Formosan Union 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 Parade Technologies with a short position of Formosan Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parade Technologies and Formosan Union.

Diversification Opportunities for Parade Technologies and Formosan Union

ParadeFormosanDiversified AwayParadeFormosanDiversified Away100%
-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between Parade and Formosan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Parade Technologies and Formosan Union Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosan Union Chemical and Parade Technologies 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 Parade Technologies are associated (or correlated) with Formosan Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosan Union Chemical has no effect on the direction of Parade Technologies i.e., Parade Technologies and Formosan Union go up and down completely randomly.

Pair Corralation between Parade Technologies and Formosan Union

Assuming the 90 days trading horizon Parade Technologies is expected to under-perform the Formosan Union. In addition to that, Parade Technologies is 1.55 times more volatile than Formosan Union Chemical. It trades about -0.16 of its total potential returns per unit of risk. Formosan Union Chemical is currently generating about 0.34 per unit of volatility. If you would invest  2,020  in Formosan Union Chemical on December 4, 2024 and sell it today you would earn a total of  140.00  from holding Formosan Union Chemical or generate 6.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Parade Technologies  vs.  Formosan Union Chemical

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505101520
JavaScript chart by amCharts 3.21.154966 1709
       Timeline  
Parade Technologies 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Parade Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFebMar660680700720740760780800820
Formosan Union Chemical 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Formosan Union Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Formosan Union is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFebMar2020.52121.522

Parade Technologies and Formosan Union Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.55-4.9-3.26-1.620.01.63.264.916.578.22 0.10.20.30.4
JavaScript chart by amCharts 3.21.154966 1709
       Returns  

Pair Trading with Parade Technologies and Formosan Union

The main advantage of trading using opposite Parade Technologies and Formosan Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parade Technologies position performs unexpectedly, Formosan Union 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 Formosan Union will offset losses from the drop in Formosan Union's long position.
The idea behind Parade Technologies and Formosan Union Chemical 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.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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