Correlation Between Power Wind and Formosa International
Can any of the company-specific risk be diversified away by investing in both Power Wind and Formosa International 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 Power Wind and Formosa International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Wind Health and Formosa International Hotels, you can compare the effects of market volatilities on Power Wind and Formosa International 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 Power Wind with a short position of Formosa International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Wind and Formosa International.
Diversification Opportunities for Power Wind and Formosa International
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Power and Formosa is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Power Wind Health and Formosa International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa International and Power Wind 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 Power Wind Health are associated (or correlated) with Formosa International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa International has no effect on the direction of Power Wind i.e., Power Wind and Formosa International go up and down completely randomly.
Pair Corralation between Power Wind and Formosa International
Assuming the 90 days trading horizon Power Wind Health is expected to generate 1.34 times more return on investment than Formosa International. However, Power Wind is 1.34 times more volatile than Formosa International Hotels. It trades about -0.14 of its potential returns per unit of risk. Formosa International Hotels is currently generating about -0.32 per unit of risk. If you would invest 11,550 in Power Wind Health on September 3, 2024 and sell it today you would lose (300.00) from holding Power Wind Health or give up 2.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Wind Health vs. Formosa International Hotels
Performance |
| Timeline |
| Power Wind Health |
| Formosa International |
Power Wind and Formosa International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Wind and Formosa International
The main advantage of trading using opposite Power Wind and Formosa International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Wind position performs unexpectedly, Formosa International 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 Formosa International will offset losses from the drop in Formosa International's long position.| Power Wind vs. Giant Manufacturing Co | Power Wind vs. Merida Industry Co | Power Wind vs. Johnson Health Tech |
| Formosa International vs. Tainan Spinning Co | Formosa International vs. Chia Her Industrial | Formosa International vs. WiseChip Semiconductor | Formosa International vs. Novatek Microelectronics Corp |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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