Correlation Between Sunfon Construction and Formosan Rubber
Can any of the company-specific risk be diversified away by investing in both Sunfon Construction and Formosan Rubber 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 Sunfon Construction and Formosan Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunfon Construction Co and Formosan Rubber Group, you can compare the effects of market volatilities on Sunfon Construction and Formosan Rubber 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 Sunfon Construction with a short position of Formosan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunfon Construction and Formosan Rubber.
Diversification Opportunities for Sunfon Construction and Formosan Rubber
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sunfon and Formosan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sunfon Construction Co and Formosan Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosan Rubber Group and Sunfon Construction 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 Sunfon Construction Co are associated (or correlated) with Formosan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosan Rubber Group has no effect on the direction of Sunfon Construction i.e., Sunfon Construction and Formosan Rubber go up and down completely randomly.
Pair Corralation between Sunfon Construction and Formosan Rubber
Assuming the 90 days trading horizon Sunfon Construction Co is expected to under-perform the Formosan Rubber. In addition to that, Sunfon Construction is 1.4 times more volatile than Formosan Rubber Group. It trades about -0.11 of its total potential returns per unit of risk. Formosan Rubber Group is currently generating about 0.06 per unit of volatility. If you would invest 2,575 in Formosan Rubber Group on November 5, 2024 and sell it today you would earn a total of 15.00 from holding Formosan Rubber Group or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunfon Construction Co vs. Formosan Rubber Group
Performance |
| Timeline |
| Sunfon Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Formosan Rubber Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Sunfon Construction and Formosan Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunfon Construction and Formosan Rubber
The main advantage of trading using opposite Sunfon Construction and Formosan Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunfon Construction position performs unexpectedly, Formosan Rubber 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 Rubber will offset losses from the drop in Formosan Rubber's long position.The idea behind Sunfon Construction Co and Formosan Rubber Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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