Correlation Between Parade Technologies and Formosan Union
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
-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 Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parade Technologies vs. Formosan Union Chemical
Performance |
| Timeline |
| Parade Technologies |
| Formosan Union Chemical |
Parade Technologies and Formosan Union Volatility Contrast
Predicted Return Density |
| 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.| Parade Technologies vs. Aspeed Technology | ||
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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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