Correlation Between ANT and Formosan Union
Can any of the company-specific risk be diversified away by investing in both ANT and Formosan Union 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 ANT and Formosan Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ANT and Formosan Union Chemical, you can compare the effects of market volatilities on ANT and Formosan Union 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 ANT with a short position of Formosan Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANT and Formosan Union.
Diversification Opportunities for ANT and Formosan Union
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ANT and Formosan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ANT and Formosan Union Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosan Union Chemical and ANT 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 ANT are associated (or correlated) with Formosan Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosan Union Chemical has no effect on the direction of ANT i.e., ANT and Formosan Union go up and down completely randomly.
Pair Corralation between ANT and Formosan Union
Assuming the 90 days trading horizon ANT is expected to generate 39.4 times more return on investment than Formosan Union. However, ANT is 39.4 times more volatile than Formosan Union Chemical. It trades about 0.1 of its potential returns per unit of risk. Formosan Union Chemical is currently generating about -0.01 per unit of risk. If you would invest 321.00 in ANT on October 21, 2024 and sell it today you would lose (174.00) from holding ANT or give up 54.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 61.15% |
| Values | Daily Returns |
ANT vs. Formosan Union Chemical
Performance |
| Timeline |
| ANT |
| Formosan Union Chemical |
ANT and Formosan Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ANT and Formosan Union
The main advantage of trading using opposite ANT and Formosan Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANT position performs unexpectedly, Formosan Union 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 Formosan Union will offset losses from the drop in Formosan Union's long position.The idea behind ANT and Formosan Union Chemical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Formosan Union vs. Oriental Union Chemical | Formosan Union vs. Everlight Chemical Industrial | Formosan Union vs. China Man Made Fiber | Formosan Union vs. Ho Tung Chemical |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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