Correlation Between Formosa Petrochemical and Hotai
Can any of the company-specific risk be diversified away by investing in both Formosa Petrochemical and Hotai 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 Hotai 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 Hotai Motor Co, you can compare the effects of market volatilities on Formosa Petrochemical and Hotai 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 Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Petrochemical and Hotai.
Diversification Opportunities for Formosa Petrochemical and Hotai
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosa and Hotai is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Petrochemical Corp and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor 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 Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Formosa Petrochemical i.e., Formosa Petrochemical and Hotai go up and down completely randomly.
Pair Corralation between Formosa Petrochemical and Hotai
Assuming the 90 days trading horizon Formosa Petrochemical Corp is expected to under-perform the Hotai. In addition to that, Formosa Petrochemical is 1.03 times more volatile than Hotai Motor Co. It trades about -0.22 of its total potential returns per unit of risk. Hotai Motor Co is currently generating about 0.01 per unit of volatility. If you would invest 61,000 in Hotai Motor Co on September 2, 2024 and sell it today you would earn a total of 400.00 from holding Hotai Motor Co or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Petrochemical Corp vs. Hotai Motor Co
Performance |
| Timeline |
| Formosa Petrochemical |
| Hotai Motor |
Formosa Petrochemical and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Petrochemical and Hotai
The main advantage of trading using opposite Formosa Petrochemical and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Petrochemical position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Formosa Petrochemical vs. WIN Semiconductors | Formosa Petrochemical vs. Winstek Semiconductor Co | Formosa Petrochemical vs. uPI Semiconductor Corp | Formosa Petrochemical vs. Niko Semiconductor Co |
| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Global Correlations Find global opportunities by holding instruments from different markets |