Correlation Between Radiant Opto and Formosa Sumco
Can any of the company-specific risk be diversified away by investing in both Radiant Opto and Formosa Sumco 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 Radiant Opto and Formosa Sumco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Radiant Opto Electronics Corp and Formosa Sumco Technology, you can compare the effects of market volatilities on Radiant Opto and Formosa Sumco 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 Radiant Opto with a short position of Formosa Sumco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Radiant Opto and Formosa Sumco.
Diversification Opportunities for Radiant Opto and Formosa Sumco
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Radiant and Formosa is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Radiant Opto Electronics Corp and Formosa Sumco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Sumco Technology and Radiant Opto 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 Radiant Opto Electronics Corp are associated (or correlated) with Formosa Sumco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Sumco Technology has no effect on the direction of Radiant Opto i.e., Radiant Opto and Formosa Sumco go up and down completely randomly.
Pair Corralation between Radiant Opto and Formosa Sumco
Assuming the 90 days trading horizon Radiant Opto Electronics Corp is expected to generate 0.92 times more return on investment than Formosa Sumco. However, Radiant Opto Electronics Corp is 1.09 times less risky than Formosa Sumco. It trades about 0.04 of its potential returns per unit of risk. Formosa Sumco Technology is currently generating about -0.23 per unit of risk. If you would invest 19,250 in Radiant Opto Electronics Corp on September 23, 2024 and sell it today you would earn a total of 650.00 from holding Radiant Opto Electronics Corp or generate 3.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Radiant Opto Electronics Corp vs. Formosa Sumco Technology
Performance |
Timeline |
Radiant Opto Electro |
Formosa Sumco Technology |
Radiant Opto and Formosa Sumco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Radiant Opto and Formosa Sumco
The main advantage of trading using opposite Radiant Opto and Formosa Sumco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radiant Opto position performs unexpectedly, Formosa Sumco 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 Sumco will offset losses from the drop in Formosa Sumco's long position.Radiant Opto vs. Powertech Technology | Radiant Opto vs. Catcher Technology Co | Radiant Opto vs. Novatek Microelectronics Corp | Radiant Opto vs. Wistron 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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