Correlation Between Grand Ocean and Formosa Electronic
Can any of the company-specific risk be diversified away by investing in both Grand Ocean and Formosa Electronic 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 Grand Ocean and Formosa Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grand Ocean Retail and Formosa Electronic Industries, you can compare the effects of market volatilities on Grand Ocean and Formosa Electronic 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 Grand Ocean with a short position of Formosa Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Ocean and Formosa Electronic.
Diversification Opportunities for Grand Ocean and Formosa Electronic
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Grand and Formosa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Grand Ocean Retail and Formosa Electronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Electronic and Grand Ocean 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 Grand Ocean Retail are associated (or correlated) with Formosa Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Electronic has no effect on the direction of Grand Ocean i.e., Grand Ocean and Formosa Electronic go up and down completely randomly.
Pair Corralation between Grand Ocean and Formosa Electronic
Assuming the 90 days trading horizon Grand Ocean Retail is expected to under-perform the Formosa Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Grand Ocean Retail is 1.61 times less risky than Formosa Electronic. The stock trades about -0.14 of its potential returns per unit of risk. The Formosa Electronic Industries is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,500 in Formosa Electronic Industries on August 26, 2024 and sell it today you would earn a total of 635.00 from holding Formosa Electronic Industries or generate 18.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grand Ocean Retail vs. Formosa Electronic Industries
Performance |
| Timeline |
| Grand Ocean Retail |
| Formosa Electronic |
Grand Ocean and Formosa Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grand Ocean and Formosa Electronic
The main advantage of trading using opposite Grand Ocean and Formosa Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Ocean position performs unexpectedly, Formosa Electronic 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 Electronic will offset losses from the drop in Formosa Electronic's long position.| Grand Ocean vs. First Steamship Co | Grand Ocean vs. Far Eastern Department | Grand Ocean vs. LongDa Construction Development | Grand Ocean vs. Collins Co |
| Formosa Electronic vs. Advantech Co | Formosa Electronic vs. IEI Integration Corp | Formosa Electronic vs. Flytech Technology Co | Formosa Electronic vs. ADLINK Technology |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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