Correlation Between Qualipoly Chemical and Formosa Electronic

Can any of the company-specific risk be diversified away by investing in both Qualipoly Chemical and Formosa Electronic 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 Qualipoly Chemical and Formosa Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qualipoly Chemical Corp and Formosa Electronic Industries, you can compare the effects of market volatilities on Qualipoly Chemical and Formosa Electronic 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 Qualipoly Chemical with a short position of Formosa Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qualipoly Chemical and Formosa Electronic.

Diversification Opportunities for Qualipoly Chemical and Formosa Electronic

0.02

Correlation Coefficient

Qualipoly Chemical  Formosa Electronic

Significant diversification

The 3 months correlation between Qualipoly and Formosa is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Qualipoly Chemical Corp and Formosa Electronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Electronic and Qualipoly Chemical 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 Qualipoly Chemical Corp are associated (or correlated) with Formosa Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Electronic has no effect on the direction of Qualipoly Chemical i.e., Qualipoly Chemical and Formosa Electronic go up and down completely randomly.

Pair Corralation between Qualipoly Chemical and Formosa Electronic

Assuming the 90 days trading horizon Qualipoly Chemical is expected to generate 3.38 times less return on investment than Formosa Electronic. But when comparing it to its historical volatility, Qualipoly Chemical Corp is 1.49 times less risky than Formosa Electronic. It trades about 0.06 of its potential returns per unit of risk. Formosa Electronic Industries is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,235  in Formosa Electronic Industries on September 5, 2024 and sell it today you would earn a total of  945.00  from holding Formosa Electronic Industries or generate 29.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Qualipoly Chemical Corp  vs.  Formosa Electronic Industries

Qualipoly Chemical Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qualipoly Chemical Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Qualipoly Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Formosa Electronic

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Formosa Electronic Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Formosa Electronic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Qualipoly Chemical and Formosa Electronic

The main advantage of trading using opposite Qualipoly Chemical and Formosa Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qualipoly Chemical position performs unexpectedly, Formosa Electronic 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 Electronic will offset losses from the drop in Formosa Electronic's long position.

The idea behind Qualipoly Chemical Corp and Formosa Electronic Industries 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.