Correlation Between Formosa Electronic and FarGlory Hotel
Can any of the company-specific risk be diversified away by investing in both Formosa Electronic and FarGlory Hotel 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 Electronic and FarGlory Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Electronic Industries and FarGlory Hotel Co, you can compare the effects of market volatilities on Formosa Electronic and FarGlory Hotel 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 Electronic with a short position of FarGlory Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Electronic and FarGlory Hotel.
Diversification Opportunities for Formosa Electronic and FarGlory Hotel
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formosa and FarGlory is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Electronic Industries and FarGlory Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FarGlory Hotel and Formosa Electronic 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 Electronic Industries are associated (or correlated) with FarGlory Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FarGlory Hotel has no effect on the direction of Formosa Electronic i.e., Formosa Electronic and FarGlory Hotel go up and down completely randomly.
Pair Corralation between Formosa Electronic and FarGlory Hotel
Assuming the 90 days trading horizon Formosa Electronic Industries is expected to generate 2.14 times more return on investment than FarGlory Hotel. However, Formosa Electronic is 2.14 times more volatile than FarGlory Hotel Co. It trades about 0.3 of its potential returns per unit of risk. FarGlory Hotel Co is currently generating about -0.14 per unit of risk. If you would invest 3,495 in Formosa Electronic Industries on August 28, 2024 and sell it today you would earn a total of 825.00 from holding Formosa Electronic Industries or generate 23.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Electronic Industries vs. FarGlory Hotel Co
Performance |
| Timeline |
| Formosa Electronic |
| FarGlory Hotel |
Formosa Electronic and FarGlory Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Electronic and FarGlory Hotel
The main advantage of trading using opposite Formosa Electronic and FarGlory Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Electronic position performs unexpectedly, FarGlory Hotel 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 FarGlory Hotel will offset losses from the drop in FarGlory Hotel's long position.| Formosa Electronic vs. Advantech Co | Formosa Electronic vs. IEI Integration Corp | Formosa Electronic vs. Flytech Technology Co | Formosa Electronic vs. ADLINK Technology |
| FarGlory Hotel vs. Ambassador Hotel | FarGlory Hotel vs. First Hotel Co | FarGlory Hotel vs. FDC International Hotels | FarGlory Hotel vs. Ruentex Development Co |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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