Correlation Between Orient Semiconductor and Formosan Rubber

Can any of the company-specific risk be diversified away by investing in both Orient Semiconductor and Formosan Rubber 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 Orient Semiconductor and Formosan Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Orient Semiconductor Electronics and Formosan Rubber Group, you can compare the effects of market volatilities on Orient Semiconductor and Formosan Rubber 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 Orient Semiconductor with a short position of Formosan Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Semiconductor and Formosan Rubber.

Diversification Opportunities for Orient Semiconductor and Formosan Rubber

-0.21

Correlation Coefficient

Orient Semiconductor  Formosan Rubber

Very good diversification

The 3 months correlation between Orient and Formosan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Orient Semiconductor Electroni and Formosan Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosan Rubber Group and Orient Semiconductor 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 Orient Semiconductor Electronics are associated (or correlated) with Formosan Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosan Rubber Group has no effect on the direction of Orient Semiconductor i.e., Orient Semiconductor and Formosan Rubber go up and down completely randomly.

Pair Corralation between Orient Semiconductor and Formosan Rubber

Assuming the 90 days trading horizon Orient Semiconductor Electronics is expected to generate 3.81 times more return on investment than Formosan Rubber. However, Orient Semiconductor is 3.81 times more volatile than Formosan Rubber Group. It trades about 0.08 of its potential returns per unit of risk. Formosan Rubber Group is currently generating about 0.07 per unit of risk. If you would invest  4,425  in Orient Semiconductor Electronics on January 30, 2024 and sell it today you would earn a total of  1,865  from holding Orient Semiconductor Electronics or generate 42.15% return on investment over 90 days.

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

Orient Semiconductor Electroni  vs.  Formosan Rubber Group

Orient Semiconductor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Semiconductor Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Orient Semiconductor is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Formosan Rubber Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Formosan Rubber Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Formosan Rubber may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Orient Semiconductor and Formosan Rubber

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

The idea behind Orient Semiconductor Electronics and Formosan Rubber Group 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.