Correlation Between Formosa Petrochemical and Qualipoly Chemical
Can any of the company-specific risk be diversified away by investing in both Formosa Petrochemical and Qualipoly Chemical 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 Petrochemical and Qualipoly Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Petrochemical Corp and Qualipoly Chemical Corp, you can compare the effects of market volatilities on Formosa Petrochemical and Qualipoly Chemical 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 Petrochemical with a short position of Qualipoly Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Petrochemical and Qualipoly Chemical.
Diversification Opportunities for Formosa Petrochemical and Qualipoly Chemical
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Formosa and Qualipoly is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Petrochemical Corp and Qualipoly Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualipoly Chemical Corp and Formosa Petrochemical 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 Petrochemical Corp are associated (or correlated) with Qualipoly Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualipoly Chemical Corp has no effect on the direction of Formosa Petrochemical i.e., Formosa Petrochemical and Qualipoly Chemical go up and down completely randomly.
Pair Corralation between Formosa Petrochemical and Qualipoly Chemical
Assuming the 90 days trading horizon Formosa Petrochemical Corp is expected to under-perform the Qualipoly Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Petrochemical Corp is 1.0 times less risky than Qualipoly Chemical. The stock trades about -0.32 of its potential returns per unit of risk. The Qualipoly Chemical Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 4,745 in Qualipoly Chemical Corp on September 25, 2024 and sell it today you would lose (195.00) from holding Qualipoly Chemical Corp or give up 4.11% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Formosa Petrochemical Corp vs. Qualipoly Chemical Corp
Performance |
Timeline |
Formosa Petrochemical |
Qualipoly Chemical Corp |
Formosa Petrochemical and Qualipoly Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Formosa Petrochemical and Qualipoly Chemical
The main advantage of trading using opposite Formosa Petrochemical and Qualipoly Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Petrochemical position performs unexpectedly, Qualipoly Chemical 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 Qualipoly Chemical will offset losses from the drop in Qualipoly Chemical's long position.Formosa Petrochemical vs. Sesoda Corp | Formosa Petrochemical vs. WT Microelectronics Co | Formosa Petrochemical vs. Chinese Maritime Transport | Formosa Petrochemical vs. Elan Microelectronics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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