Correlation Between Taiwan Cement and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Taiwan Cement and Far Eastern 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 Taiwan Cement and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Cement Corp and Far Eastern New, you can compare the effects of market volatilities on Taiwan Cement and Far Eastern 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 Taiwan Cement with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cement and Far Eastern.
Diversification Opportunities for Taiwan Cement and Far Eastern
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Taiwan and Far is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cement Corp and Far Eastern New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern New and Taiwan Cement 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 Taiwan Cement Corp are associated (or correlated) with Far Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far Eastern New has no effect on the direction of Taiwan Cement i.e., Taiwan Cement and Far Eastern go up and down completely randomly.
Pair Corralation between Taiwan Cement and Far Eastern
Assuming the 90 days trading horizon Taiwan Cement is expected to generate 5.38 times less return on investment than Far Eastern. But when comparing it to its historical volatility, Taiwan Cement Corp is 1.25 times less risky than Far Eastern. It trades about 0.0 of its potential returns per unit of risk. Far Eastern New is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,320 in Far Eastern New on August 30, 2024 and sell it today you would earn a total of 180.00 from holding Far Eastern New or generate 5.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cement Corp vs. Far Eastern New
Performance |
| Timeline |
| Taiwan Cement Corp |
| Far Eastern New |
Taiwan Cement and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cement and Far Eastern
The main advantage of trading using opposite Taiwan Cement and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cement position performs unexpectedly, Far Eastern 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 Far Eastern will offset losses from the drop in Far Eastern's long position.| Taiwan Cement vs. Asia Cement Corp | Taiwan Cement vs. Formosa Plastics Corp | Taiwan Cement vs. Nan Ya Plastics | Taiwan Cement vs. China Steel Corp |
| Far Eastern vs. Yulon Motor Co | Far Eastern vs. Far Eastern Department | Far Eastern vs. China Steel Corp | Far Eastern vs. Chang Hwa Commercial |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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