Correlation Between Formosa Petrochemical and Shinkong Synthetic
Can any of the company-specific risk be diversified away by investing in both Formosa Petrochemical and Shinkong Synthetic 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 Formosa Petrochemical and Shinkong Synthetic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Petrochemical Corp and Shinkong Synthetic Fiber, you can compare the effects of market volatilities on Formosa Petrochemical and Shinkong Synthetic 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 Formosa Petrochemical with a short position of Shinkong Synthetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Petrochemical and Shinkong Synthetic.
Diversification Opportunities for Formosa Petrochemical and Shinkong Synthetic
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Formosa and Shinkong is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Petrochemical Corp and Shinkong Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Synthetic Fiber and Formosa Petrochemical 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 Formosa Petrochemical Corp are associated (or correlated) with Shinkong Synthetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Synthetic Fiber has no effect on the direction of Formosa Petrochemical i.e., Formosa Petrochemical and Shinkong Synthetic go up and down completely randomly.
Pair Corralation between Formosa Petrochemical and Shinkong Synthetic
Assuming the 90 days trading horizon Formosa Petrochemical Corp is expected to under-perform the Shinkong Synthetic. In addition to that, Formosa Petrochemical is 1.03 times more volatile than Shinkong Synthetic Fiber. It trades about -0.15 of its total potential returns per unit of risk. Shinkong Synthetic Fiber is currently generating about -0.01 per unit of volatility. If you would invest 1,725 in Shinkong Synthetic Fiber on September 12, 2024 and sell it today you would lose (130.00) from holding Shinkong Synthetic Fiber or give up 7.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Petrochemical Corp vs. Shinkong Synthetic Fiber
Performance |
| Timeline |
| Formosa Petrochemical |
| Shinkong Synthetic Fiber |
Formosa Petrochemical and Shinkong Synthetic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Petrochemical and Shinkong Synthetic
The main advantage of trading using opposite Formosa Petrochemical and Shinkong Synthetic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Petrochemical position performs unexpectedly, Shinkong Synthetic 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 Shinkong Synthetic will offset losses from the drop in Shinkong Synthetic's long position.| Formosa Petrochemical vs. President Chain Store | Formosa Petrochemical vs. Huaku Development Co | Formosa Petrochemical vs. Formosa International Hotels | Formosa Petrochemical vs. Taiwan Fu Hsing |
| Shinkong Synthetic vs. Tainan Spinning Co | Shinkong Synthetic vs. Lealea Enterprise Co | Shinkong Synthetic vs. China Petrochemical Development | Shinkong Synthetic vs. Ruentex Development 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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