Correlation Between Tong Hsing and Formosa Sumco
Can any of the company-specific risk be diversified away by investing in both Tong Hsing and Formosa Sumco 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 Tong Hsing and Formosa Sumco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tong Hsing Electronic and Formosa Sumco Technology, you can compare the effects of market volatilities on Tong Hsing and Formosa Sumco 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 Tong Hsing with a short position of Formosa Sumco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hsing and Formosa Sumco.
Diversification Opportunities for Tong Hsing and Formosa Sumco
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tong and Formosa is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hsing Electronic and Formosa Sumco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Sumco Technology and Tong Hsing 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 Tong Hsing Electronic are associated (or correlated) with Formosa Sumco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Sumco Technology has no effect on the direction of Tong Hsing i.e., Tong Hsing and Formosa Sumco go up and down completely randomly.
Pair Corralation between Tong Hsing and Formosa Sumco
Assuming the 90 days trading horizon Tong Hsing Electronic is expected to under-perform the Formosa Sumco. In addition to that, Tong Hsing is 1.23 times more volatile than Formosa Sumco Technology. It trades about -0.03 of its total potential returns per unit of risk. Formosa Sumco Technology is currently generating about -0.02 per unit of volatility. If you would invest 15,200 in Formosa Sumco Technology on August 30, 2024 and sell it today you would lose (3,750) from holding Formosa Sumco Technology or give up 24.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tong Hsing Electronic vs. Formosa Sumco Technology
Performance |
| Timeline |
| Tong Hsing Electronic |
| Formosa Sumco Technology |
Tong Hsing and Formosa Sumco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tong Hsing and Formosa Sumco
The main advantage of trading using opposite Tong Hsing and Formosa Sumco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tong Hsing position performs unexpectedly, Formosa Sumco 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 Sumco will offset losses from the drop in Formosa Sumco's long position.| Tong Hsing vs. Kinsus Interconnect Technology | Tong Hsing vs. Unimicron Technology Corp | Tong Hsing vs. Nan Ya Printed | Tong Hsing vs. WIN Semiconductors |
| Formosa Sumco vs. GlobalWafers Co | Formosa Sumco vs. Kinsus Interconnect Technology | Formosa Sumco vs. Nanya Technology Corp | Formosa Sumco vs. Wafer Works |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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