Correlation Between Formosa Petrochemical and Yeou Yih
Can any of the company-specific risk be diversified away by investing in both Formosa Petrochemical and Yeou Yih 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 Yeou Yih 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 Yeou Yih Steel, you can compare the effects of market volatilities on Formosa Petrochemical and Yeou Yih 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 Yeou Yih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Petrochemical and Yeou Yih.
Diversification Opportunities for Formosa Petrochemical and Yeou Yih
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosa and Yeou is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Petrochemical Corp and Yeou Yih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yeou Yih Steel 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 Yeou Yih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yeou Yih Steel has no effect on the direction of Formosa Petrochemical i.e., Formosa Petrochemical and Yeou Yih go up and down completely randomly.
Pair Corralation between Formosa Petrochemical and Yeou Yih
Assuming the 90 days trading horizon Formosa Petrochemical Corp is expected to under-perform the Yeou Yih. In addition to that, Formosa Petrochemical is 1.67 times more volatile than Yeou Yih Steel. It trades about -0.45 of its total potential returns per unit of risk. Yeou Yih Steel is currently generating about -0.01 per unit of volatility. If you would invest 1,540 in Yeou Yih Steel on September 13, 2024 and sell it today you would lose (5.00) from holding Yeou Yih Steel or give up 0.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Petrochemical Corp vs. Yeou Yih Steel
Performance |
| Timeline |
| Formosa Petrochemical |
| Yeou Yih Steel |
Formosa Petrochemical and Yeou Yih Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Petrochemical and Yeou Yih
The main advantage of trading using opposite Formosa Petrochemical and Yeou Yih positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Petrochemical position performs unexpectedly, Yeou Yih 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 Yeou Yih will offset losses from the drop in Yeou Yih's long position.| Formosa Petrochemical vs. Chief Telecom | Formosa Petrochemical vs. Apex Biotechnology Corp | Formosa Petrochemical vs. Insyde Software | Formosa Petrochemical vs. SynCore Biotechnology Co |
| Yeou Yih vs. BenQ Medical Technology | Yeou Yih vs. Cowealth Medical Holding | Yeou Yih vs. Jia Jie Biomedical | Yeou Yih vs. Taiwan Speciality Chemicals |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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