Correlation Between Formosa Optical and Pou Chen
Can any of the company-specific risk be diversified away by investing in both Formosa Optical and Pou Chen 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 Formosa Optical and Pou Chen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Optical Technology and Pou Chen Corp, you can compare the effects of market volatilities on Formosa Optical and Pou Chen 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 Formosa Optical with a short position of Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Optical and Pou Chen.
Diversification Opportunities for Formosa Optical and Pou Chen
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formosa and Pou is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Optical Technology and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen Corp and Formosa Optical 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 Formosa Optical Technology are associated (or correlated) with Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of Formosa Optical i.e., Formosa Optical and Pou Chen go up and down completely randomly.
Pair Corralation between Formosa Optical and Pou Chen
Assuming the 90 days trading horizon Formosa Optical Technology is expected to generate 0.44 times more return on investment than Pou Chen. However, Formosa Optical Technology is 2.25 times less risky than Pou Chen. It trades about 0.11 of its potential returns per unit of risk. Pou Chen Corp is currently generating about -0.17 per unit of risk. If you would invest 10,700 in Formosa Optical Technology on September 25, 2024 and sell it today you would earn a total of 250.00 from holding Formosa Optical Technology or generate 2.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.45% |
Values | Daily Returns |
Formosa Optical Technology vs. Pou Chen Corp
Performance |
Timeline |
Formosa Optical Tech |
Pou Chen Corp |
Formosa Optical and Pou Chen Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Optical and Pou Chen
The main advantage of trading using opposite Formosa Optical and Pou Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Optical position performs unexpectedly, Pou Chen 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 Pou Chen will offset losses from the drop in Pou Chen's long position.Formosa Optical vs. Merida Industry Co | Formosa Optical vs. Cheng Shin Rubber | Formosa Optical vs. Uni President Enterprises Corp | Formosa Optical vs. Pou Chen Corp |
Pou Chen vs. Merida Industry Co | Pou Chen vs. Cheng Shin Rubber | Pou Chen vs. Uni President Enterprises 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |