Correlation Between Fortune Electric and Falcon Power
Can any of the company-specific risk be diversified away by investing in both Fortune Electric and Falcon Power 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 Fortune Electric and Falcon Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Electric Co and Falcon Power Co, you can compare the effects of market volatilities on Fortune Electric and Falcon Power 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 Fortune Electric with a short position of Falcon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Electric and Falcon Power.
Diversification Opportunities for Fortune Electric and Falcon Power
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fortune and Falcon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Electric Co and Falcon Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Power and Fortune Electric 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 Fortune Electric Co are associated (or correlated) with Falcon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Power has no effect on the direction of Fortune Electric i.e., Fortune Electric and Falcon Power go up and down completely randomly.
Pair Corralation between Fortune Electric and Falcon Power
Assuming the 90 days trading horizon Fortune Electric Co is expected to generate 1.74 times more return on investment than Falcon Power. However, Fortune Electric is 1.74 times more volatile than Falcon Power Co. It trades about -0.01 of its potential returns per unit of risk. Falcon Power Co is currently generating about -0.08 per unit of risk. If you would invest 57,300 in Fortune Electric Co on August 29, 2024 and sell it today you would lose (1,300) from holding Fortune Electric Co or give up 2.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortune Electric Co vs. Falcon Power Co
Performance |
| Timeline |
| Fortune Electric |
| Falcon Power |
Fortune Electric and Falcon Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Electric and Falcon Power
The main advantage of trading using opposite Fortune Electric and Falcon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Electric position performs unexpectedly, Falcon Power 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 Falcon Power will offset losses from the drop in Falcon Power's long position.| Fortune Electric vs. Chung Hsin Electric Machinery | Fortune Electric vs. TECO Electric Machinery | Fortune Electric vs. Shihlin Electric Engineering | Fortune Electric vs. Allis Electric Co |
| Falcon Power vs. Yulon Motor Co | Falcon Power vs. Far Eastern Department | Falcon Power vs. China Steel Corp | Falcon Power 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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