Correlation Between GlobalWafers and Formosa Sumco
Can any of the company-specific risk be diversified away by investing in both GlobalWafers 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 GlobalWafers and Formosa Sumco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlobalWafers Co and Formosa Sumco Technology, you can compare the effects of market volatilities on GlobalWafers 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 GlobalWafers with a short position of Formosa Sumco. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlobalWafers and Formosa Sumco.
Diversification Opportunities for GlobalWafers and Formosa Sumco
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GlobalWafers and Formosa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co 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 GlobalWafers 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 GlobalWafers Co 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 GlobalWafers i.e., GlobalWafers and Formosa Sumco go up and down completely randomly.
Pair Corralation between GlobalWafers and Formosa Sumco
Assuming the 90 days trading horizon GlobalWafers Co is expected to generate 0.83 times more return on investment than Formosa Sumco. However, GlobalWafers Co is 1.2 times less risky than Formosa Sumco. It trades about -0.15 of its potential returns per unit of risk. Formosa Sumco Technology is currently generating about -0.2 per unit of risk. If you would invest 46,100 in GlobalWafers Co on September 15, 2024 and sell it today you would lose (6,550) from holding GlobalWafers Co or give up 14.21% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
GlobalWafers Co vs. Formosa Sumco Technology
Performance |
Timeline |
GlobalWafers |
Formosa Sumco Technology |
GlobalWafers and Formosa Sumco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GlobalWafers and Formosa Sumco
The main advantage of trading using opposite GlobalWafers and Formosa Sumco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlobalWafers 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.GlobalWafers vs. WIN Semiconductors | GlobalWafers vs. Sino American Silicon Products | GlobalWafers vs. Novatek Microelectronics Corp | GlobalWafers vs. Yageo Corp |
Formosa Sumco vs. GlobalWafers Co | Formosa Sumco vs. Kinsus Interconnect Technology | Formosa Sumco vs. Nanya Technology Corp | Formosa Sumco vs. Wafer Works |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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