Correlation Between China Television and Formosa Optical
Can any of the company-specific risk be diversified away by investing in both China Television and Formosa Optical 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 China Television and Formosa Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Television Co and Formosa Optical Technology, you can compare the effects of market volatilities on China Television and Formosa Optical 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 China Television with a short position of Formosa Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Television and Formosa Optical.
Diversification Opportunities for China Television and Formosa Optical
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Formosa is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Television Co and Formosa Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Optical Tech and China Television 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 China Television Co are associated (or correlated) with Formosa Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Optical Tech has no effect on the direction of China Television i.e., China Television and Formosa Optical go up and down completely randomly.
Pair Corralation between China Television and Formosa Optical
Assuming the 90 days trading horizon China Television Co is expected to under-perform the Formosa Optical. In addition to that, China Television is 2.33 times more volatile than Formosa Optical Technology. It trades about -0.05 of its total potential returns per unit of risk. Formosa Optical Technology is currently generating about 0.08 per unit of volatility. If you would invest 9,919 in Formosa Optical Technology on September 3, 2024 and sell it today you would earn a total of 931.00 from holding Formosa Optical Technology or generate 9.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Television Co vs. Formosa Optical Technology
Performance |
| Timeline |
| China Television |
| Formosa Optical Tech |
China Television and Formosa Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Television and Formosa Optical
The main advantage of trading using opposite China Television and Formosa Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Television position performs unexpectedly, Formosa Optical 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 Optical will offset losses from the drop in Formosa Optical's long position.| China Television vs. Choice Development | China Television vs. Ton Yi Industrial | China Television vs. Taiwan Sakura Corp | China Television vs. Thye Ming Industrial |
| Formosa Optical vs. Tainan Spinning Co | Formosa Optical vs. Chia Her Industrial | Formosa Optical vs. WiseChip Semiconductor | Formosa Optical 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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