Correlation Between Formosa Petrochemical and MediaTek
Can any of the company-specific risk be diversified away by investing in both Formosa Petrochemical and MediaTek 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 MediaTek 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 MediaTek, you can compare the effects of market volatilities on Formosa Petrochemical and MediaTek 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 MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Petrochemical and MediaTek.
Diversification Opportunities for Formosa Petrochemical and MediaTek
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosa and MediaTek is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Petrochemical Corp and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek 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 MediaTek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaTek has no effect on the direction of Formosa Petrochemical i.e., Formosa Petrochemical and MediaTek go up and down completely randomly.
Pair Corralation between Formosa Petrochemical and MediaTek
Assuming the 90 days trading horizon Formosa Petrochemical Corp is expected to under-perform the MediaTek. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Petrochemical Corp is 1.79 times less risky than MediaTek. The stock trades about -0.16 of its potential returns per unit of risk. The MediaTek is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 96,600 in MediaTek on August 28, 2024 and sell it today you would earn a total of 31,400 from holding MediaTek or generate 32.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Petrochemical Corp vs. MediaTek
Performance |
| Timeline |
| Formosa Petrochemical |
| MediaTek |
Formosa Petrochemical and MediaTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Petrochemical and MediaTek
The main advantage of trading using opposite Formosa Petrochemical and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Petrochemical position performs unexpectedly, MediaTek 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 MediaTek will offset losses from the drop in MediaTek's long position.| Formosa Petrochemical vs. U Media Communications | Formosa Petrochemical vs. WinMate Communication INC | Formosa Petrochemical vs. GAME HOURS | Formosa Petrochemical vs. International Games System |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |