Correlation Between Formosa Electronic and Grand Ocean
Can any of the company-specific risk be diversified away by investing in both Formosa Electronic and Grand Ocean 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 Grand Ocean 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 Grand Ocean Retail, you can compare the effects of market volatilities on Formosa Electronic and Grand Ocean 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 Grand Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Electronic and Grand Ocean.
Diversification Opportunities for Formosa Electronic and Grand Ocean
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formosa and Grand is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Electronic Industries and Grand Ocean Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Ocean Retail 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 Grand Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Ocean Retail has no effect on the direction of Formosa Electronic i.e., Formosa Electronic and Grand Ocean go up and down completely randomly.
Pair Corralation between Formosa Electronic and Grand Ocean
Assuming the 90 days trading horizon Formosa Electronic Industries is expected to generate 1.14 times more return on investment than Grand Ocean. However, Formosa Electronic is 1.14 times more volatile than Grand Ocean Retail. It trades about 0.35 of its potential returns per unit of risk. Grand Ocean Retail is currently generating about -0.13 per unit of risk. If you would invest 3,450 in Formosa Electronic Industries on August 30, 2024 and sell it today you would earn a total of 1,170 from holding Formosa Electronic Industries or generate 33.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Electronic Industries vs. Grand Ocean Retail
Performance |
| Timeline |
| Formosa Electronic |
| Grand Ocean Retail |
Formosa Electronic and Grand Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Electronic and Grand Ocean
The main advantage of trading using opposite Formosa Electronic and Grand Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Electronic position performs unexpectedly, Grand Ocean 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 Grand Ocean will offset losses from the drop in Grand Ocean's long position.| Formosa Electronic vs. Info Tek | Formosa Electronic vs. Gallant Precision Machining | Formosa Electronic vs. Walton Advanced Engineering | Formosa Electronic vs. Cheng Mei Materials |
| Grand Ocean vs. First Steamship Co | Grand Ocean vs. Far Eastern Department | Grand Ocean vs. LongDa Construction Development | Grand Ocean vs. Collins 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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