Correlation Between Champion Microelectronic and Formosa Optical
Can any of the company-specific risk be diversified away by investing in both Champion Microelectronic 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 Champion Microelectronic and Formosa Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champion Microelectronic Corp and Formosa Optical Technology, you can compare the effects of market volatilities on Champion Microelectronic 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 Champion Microelectronic with a short position of Formosa Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champion Microelectronic and Formosa Optical.
Diversification Opportunities for Champion Microelectronic and Formosa Optical
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Champion and Formosa is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Champion Microelectronic Corp 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 Champion Microelectronic 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 Champion Microelectronic Corp 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 Champion Microelectronic i.e., Champion Microelectronic and Formosa Optical go up and down completely randomly.
Pair Corralation between Champion Microelectronic and Formosa Optical
Assuming the 90 days trading horizon Champion Microelectronic is expected to generate 5.74 times less return on investment than Formosa Optical. In addition to that, Champion Microelectronic is 1.63 times more volatile than Formosa Optical Technology. It trades about 0.01 of its total potential returns per unit of risk. Formosa Optical Technology is currently generating about 0.14 per unit of volatility. If you would invest 6,499 in Formosa Optical Technology on February 3, 2024 and sell it today you would earn a total of 3,951 from holding Formosa Optical Technology or generate 60.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Champion Microelectronic Corp vs. Formosa Optical Technology
Performance |
Timeline |
Champion Microelectronic |
Formosa Optical Tech |
Champion Microelectronic and Formosa Optical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Champion Microelectronic and Formosa Optical
The main advantage of trading using opposite Champion Microelectronic and Formosa Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Microelectronic 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.Champion Microelectronic vs. Nuvoton Technology Corp | Champion Microelectronic vs. Generalplus Technology | Champion Microelectronic vs. Holtek Semiconductor | Champion Microelectronic vs. Scientech Corp |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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