Correlation Between Taiwan Fertilizer and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Taiwan Fertilizer 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 Fertilizer 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 Fertilizer Co and Far Eastern New, you can compare the effects of market volatilities on Taiwan Fertilizer 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 Fertilizer with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Fertilizer and Far Eastern.
Diversification Opportunities for Taiwan Fertilizer and Far Eastern
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and Far is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Fertilizer 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 Taiwan Fertilizer 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 Fertilizer 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 Taiwan Fertilizer i.e., Taiwan Fertilizer and Far Eastern go up and down completely randomly.
Pair Corralation between Taiwan Fertilizer and Far Eastern
Assuming the 90 days trading horizon Taiwan Fertilizer Co is expected to under-perform the Far Eastern. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Fertilizer Co is 1.25 times less risky than Far Eastern. The stock trades about -0.01 of its potential returns per unit of risk. The Far Eastern New is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,260 in Far Eastern New on August 30, 2024 and sell it today you would earn a total of 240.00 from holding Far Eastern New or generate 7.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Fertilizer Co vs. Far Eastern New
Performance |
| Timeline |
| Taiwan Fertilizer |
| Far Eastern New |
Taiwan Fertilizer and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Fertilizer and Far Eastern
The main advantage of trading using opposite Taiwan Fertilizer and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Fertilizer 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 Fertilizer vs. Taiwan Cement Corp | Taiwan Fertilizer vs. Far Eastern New | Taiwan Fertilizer vs. Asia Cement Corp | Taiwan Fertilizer vs. Formosa Plastics 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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