Correlation Between Formosa Sumco and Faraday Technology
Can any of the company-specific risk be diversified away by investing in both Formosa Sumco and Faraday Technology 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 Sumco and Faraday Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Sumco Technology and Faraday Technology Corp, you can compare the effects of market volatilities on Formosa Sumco and Faraday Technology 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 Sumco with a short position of Faraday Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Sumco and Faraday Technology.
Diversification Opportunities for Formosa Sumco and Faraday Technology
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formosa and Faraday is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Sumco Technology and Faraday Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Technology Corp and Formosa Sumco 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 Sumco Technology are associated (or correlated) with Faraday Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Technology Corp has no effect on the direction of Formosa Sumco i.e., Formosa Sumco and Faraday Technology go up and down completely randomly.
Pair Corralation between Formosa Sumco and Faraday Technology
Assuming the 90 days trading horizon Formosa Sumco Technology is expected to under-perform the Faraday Technology. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Sumco Technology is 1.13 times less risky than Faraday Technology. The stock trades about -0.23 of its potential returns per unit of risk. The Faraday Technology Corp is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 26,250 in Faraday Technology Corp on September 23, 2024 and sell it today you would lose (3,150) from holding Faraday Technology Corp or give up 12.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Formosa Sumco Technology vs. Faraday Technology Corp
Performance |
Timeline |
Formosa Sumco Technology |
Faraday Technology Corp |
Formosa Sumco and Faraday Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Sumco and Faraday Technology
The main advantage of trading using opposite Formosa Sumco and Faraday Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Sumco position performs unexpectedly, Faraday Technology 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 Faraday Technology will offset losses from the drop in Faraday Technology's long position.Formosa Sumco vs. GlobalWafers Co | Formosa Sumco vs. Kinsus Interconnect Technology | Formosa Sumco vs. Nanya Technology Corp | Formosa Sumco vs. Wafer Works |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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