Correlation Between Formosa Petrochemical and Chailease Holding
Can any of the company-specific risk be diversified away by investing in both Formosa Petrochemical and Chailease Holding 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 Chailease Holding 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 Chailease Holding Co, you can compare the effects of market volatilities on Formosa Petrochemical and Chailease Holding 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 Chailease Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Petrochemical and Chailease Holding.
Diversification Opportunities for Formosa Petrochemical and Chailease Holding
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosa and Chailease is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Petrochemical Corp and Chailease Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chailease Holding 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 Chailease Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chailease Holding has no effect on the direction of Formosa Petrochemical i.e., Formosa Petrochemical and Chailease Holding go up and down completely randomly.
Pair Corralation between Formosa Petrochemical and Chailease Holding
Assuming the 90 days trading horizon Formosa Petrochemical Corp is expected to under-perform the Chailease Holding. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Petrochemical Corp is 1.39 times less risky than Chailease Holding. The stock trades about -0.09 of its potential returns per unit of risk. The Chailease Holding Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 20,160 in Chailease Holding Co on August 28, 2024 and sell it today you would lose (7,960) from holding Chailease Holding Co or give up 39.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Formosa Petrochemical Corp vs. Chailease Holding Co
Performance |
| Timeline |
| Formosa Petrochemical |
| Chailease Holding |
Formosa Petrochemical and Chailease Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Petrochemical and Chailease Holding
The main advantage of trading using opposite Formosa Petrochemical and Chailease Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Petrochemical position performs unexpectedly, Chailease Holding 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 Chailease Holding will offset losses from the drop in Chailease Holding's long position.| Formosa Petrochemical vs. Healthconn Corp | Formosa Petrochemical vs. Phytohealth Corp | Formosa Petrochemical vs. Tait Marketing Distribution | Formosa Petrochemical vs. Louisa Professional Coffee |
| Chailease Holding vs. Fubon Financial Holding | Chailease Holding vs. CTBC Financial Holding | Chailease Holding vs. Mega Financial Holding | Chailease Holding vs. Cathay Financial Holding |
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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