Correlation Between Formosa Petrochemical and Tang Eng
Can any of the company-specific risk be diversified away by investing in both Formosa Petrochemical and Tang Eng 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 Tang Eng 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 Tang Eng Iron, you can compare the effects of market volatilities on Formosa Petrochemical and Tang Eng 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 Tang Eng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Petrochemical and Tang Eng.
Diversification Opportunities for Formosa Petrochemical and Tang Eng
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosa and Tang is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Petrochemical Corp and Tang Eng Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tang Eng Iron 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 Tang Eng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tang Eng Iron has no effect on the direction of Formosa Petrochemical i.e., Formosa Petrochemical and Tang Eng go up and down completely randomly.
Pair Corralation between Formosa Petrochemical and Tang Eng
Assuming the 90 days trading horizon Formosa Petrochemical Corp is expected to under-perform the Tang Eng. In addition to that, Formosa Petrochemical is 1.54 times more volatile than Tang Eng Iron. It trades about -0.14 of its total potential returns per unit of risk. Tang Eng Iron is currently generating about 0.02 per unit of volatility. If you would invest 3,100 in Tang Eng Iron on September 3, 2024 and sell it today you would earn a total of 215.00 from holding Tang Eng Iron or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Petrochemical Corp vs. Tang Eng Iron
Performance |
| Timeline |
| Formosa Petrochemical |
| Tang Eng Iron |
Formosa Petrochemical and Tang Eng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Petrochemical and Tang Eng
The main advantage of trading using opposite Formosa Petrochemical and Tang Eng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Petrochemical position performs unexpectedly, Tang Eng 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 Tang Eng will offset losses from the drop in Tang Eng's long position.| Formosa Petrochemical vs. Taishin Financial Holding | Formosa Petrochemical vs. Oceanic Beverages Co | Formosa Petrochemical vs. Union Bank of | Formosa Petrochemical vs. Professional Computer 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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