Correlation Between Tainan Spinning and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Tainan Spinning 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 Tainan Spinning and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tainan Spinning Co and Far Eastern New, you can compare the effects of market volatilities on Tainan Spinning 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 Tainan Spinning with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tainan Spinning and Far Eastern.
Diversification Opportunities for Tainan Spinning and Far Eastern
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tainan and Far is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tainan Spinning Co 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 Tainan Spinning 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 Tainan Spinning Co 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 Tainan Spinning i.e., Tainan Spinning and Far Eastern go up and down completely randomly.
Pair Corralation between Tainan Spinning and Far Eastern
Assuming the 90 days trading horizon Tainan Spinning Co is expected to generate 0.46 times more return on investment than Far Eastern. However, Tainan Spinning Co is 2.17 times less risky than Far Eastern. It trades about -0.01 of its potential returns per unit of risk. Far Eastern New is currently generating about -0.19 per unit of risk. If you would invest 1,520 in Tainan Spinning Co on August 31, 2024 and sell it today you would lose (5.00) from holding Tainan Spinning Co or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tainan Spinning Co vs. Far Eastern New
Performance |
| Timeline |
| Tainan Spinning |
| Far Eastern New |
Tainan Spinning and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tainan Spinning and Far Eastern
The main advantage of trading using opposite Tainan Spinning and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tainan Spinning 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.| Tainan Spinning vs. Lealea Enterprise Co | Tainan Spinning vs. China Petrochemical Development | Tainan Spinning vs. Li Peng Enterprise | Tainan Spinning vs. Oriental Union Chemical |
| Far Eastern vs. BES Engineering Co | Far Eastern vs. Continental Holdings Corp | Far Eastern vs. Kee Tai Properties | Far Eastern vs. Hung Sheng Construction |
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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