Correlation Between Landis Taipei and Formosa International
Can any of the company-specific risk be diversified away by investing in both Landis Taipei and Formosa International 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 Landis Taipei and Formosa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Landis Taipei Hotel and Formosa International Hotels, you can compare the effects of market volatilities on Landis Taipei and Formosa International 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 Landis Taipei with a short position of Formosa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Landis Taipei and Formosa International.
Diversification Opportunities for Landis Taipei and Formosa International
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Landis and Formosa is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Landis Taipei Hotel and Formosa International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa International and Landis Taipei 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 Landis Taipei Hotel are associated (or correlated) with Formosa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa International has no effect on the direction of Landis Taipei i.e., Landis Taipei and Formosa International go up and down completely randomly.
Pair Corralation between Landis Taipei and Formosa International
Assuming the 90 days trading horizon Landis Taipei Hotel is expected to generate 2.31 times more return on investment than Formosa International. However, Landis Taipei is 2.31 times more volatile than Formosa International Hotels. It trades about 0.01 of its potential returns per unit of risk. Formosa International Hotels is currently generating about -0.28 per unit of risk. If you would invest 1,870 in Landis Taipei Hotel on August 24, 2024 and sell it today you would earn a total of 0.00 from holding Landis Taipei Hotel or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Landis Taipei Hotel vs. Formosa International Hotels
Performance |
| Timeline |
| Landis Taipei Hotel |
| Formosa International |
Landis Taipei and Formosa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Landis Taipei and Formosa International
The main advantage of trading using opposite Landis Taipei and Formosa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Landis Taipei position performs unexpectedly, Formosa International 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 International will offset losses from the drop in Formosa International's long position.| Landis Taipei vs. Formosa International Hotels | Landis Taipei vs. Ambassador Hotel | Landis Taipei vs. FDC International Hotels | Landis Taipei vs. First Hotel Co |
| Formosa International vs. Taiwan Semiconductor Manufacturing | Formosa International vs. Hon Hai Precision | Formosa International vs. MediaTek | Formosa International 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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