Correlation Between Ruentex Development and Formosa Advanced
Can any of the company-specific risk be diversified away by investing in both Ruentex Development and Formosa Advanced 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 Ruentex Development and Formosa Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ruentex Development Co and Formosa Advanced Technologies, you can compare the effects of market volatilities on Ruentex Development and Formosa Advanced 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 Ruentex Development with a short position of Formosa Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Formosa Advanced.
Diversification Opportunities for Ruentex Development and Formosa Advanced
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ruentex and Formosa is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Formosa Advanced Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Advanced Tec and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with Formosa Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Advanced Tec has no effect on the direction of Ruentex Development i.e., Ruentex Development and Formosa Advanced go up and down completely randomly.
Pair Corralation between Ruentex Development and Formosa Advanced
Assuming the 90 days trading horizon Ruentex Development Co is expected to generate 1.98 times more return on investment than Formosa Advanced. However, Ruentex Development is 1.98 times more volatile than Formosa Advanced Technologies. It trades about 0.02 of its potential returns per unit of risk. Formosa Advanced Technologies is currently generating about -0.05 per unit of risk. If you would invest 4,365 in Ruentex Development Co on September 14, 2024 and sell it today you would earn a total of 255.00 from holding Ruentex Development Co or generate 5.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ruentex Development Co vs. Formosa Advanced Technologies
Performance |
| Timeline |
| Ruentex Development |
| Formosa Advanced Tec |
Ruentex Development and Formosa Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ruentex Development and Formosa Advanced
The main advantage of trading using opposite Ruentex Development and Formosa Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development position performs unexpectedly, Formosa Advanced 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 Advanced will offset losses from the drop in Formosa Advanced's long position.| Ruentex Development vs. Ruentex Industries | Ruentex Development vs. Pou Chen Corp | Ruentex Development vs. Fubon Financial Holding | Ruentex Development vs. Cathay Financial Holding |
| Formosa Advanced vs. AU Optronics | Formosa Advanced vs. Innolux Corp | Formosa Advanced vs. Ruentex Development Co | Formosa Advanced vs. WiseChip Semiconductor |
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 Correlations module to find global opportunities by holding instruments from different markets.
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