Correlation Between Far Eastern and Oriental Union
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Oriental Union 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 Far Eastern and Oriental Union into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Far Eastern New and Oriental Union Chemical, you can compare the effects of market volatilities on Far Eastern and Oriental Union 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 Far Eastern with a short position of Oriental Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Oriental Union.
Diversification Opportunities for Far Eastern and Oriental Union
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Far and Oriental is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern New and Oriental Union Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Union Chemical and Far Eastern 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 Far Eastern New are associated (or correlated) with Oriental Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Union Chemical has no effect on the direction of Far Eastern i.e., Far Eastern and Oriental Union go up and down completely randomly.
Pair Corralation between Far Eastern and Oriental Union
Assuming the 90 days trading horizon Far Eastern New is expected to generate 1.0 times more return on investment than Oriental Union. However, Far Eastern New is 1.0 times less risky than Oriental Union. It trades about 0.03 of its potential returns per unit of risk. Oriental Union Chemical is currently generating about -0.01 per unit of risk. If you would invest 3,280 in Far Eastern New on August 26, 2024 and sell it today you would earn a total of 540.00 from holding Far Eastern New or generate 16.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern New vs. Oriental Union Chemical
Performance |
| Timeline |
| Far Eastern New |
| Oriental Union Chemical |
Far Eastern and Oriental Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Oriental Union
The main advantage of trading using opposite Far Eastern and Oriental Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Oriental Union 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 Oriental Union will offset losses from the drop in Oriental Union's long position.| Far Eastern vs. Sunny Friend Environmental | Far Eastern vs. TTET Union Corp | Far Eastern vs. ECOVE Environment Corp | Far Eastern vs. Yulon Finance Corp |
| Oriental Union vs. Cheng Shin Rubber | Oriental Union vs. Taiwan Cement Corp | Oriental Union vs. China Steel Chemical | Oriental Union vs. Yulon Motor Co |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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