Correlation Between Feng Hsin and First Hotel
Can any of the company-specific risk be diversified away by investing in both Feng Hsin and First Hotel 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 Feng Hsin and First Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Feng Hsin Steel and First Hotel Co, you can compare the effects of market volatilities on Feng Hsin and First Hotel 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 Feng Hsin with a short position of First Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Feng Hsin and First Hotel.
Diversification Opportunities for Feng Hsin and First Hotel
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Feng and First is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Feng Hsin Steel and First Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hotel and Feng Hsin 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 Feng Hsin Steel are associated (or correlated) with First Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hotel has no effect on the direction of Feng Hsin i.e., Feng Hsin and First Hotel go up and down completely randomly.
Pair Corralation between Feng Hsin and First Hotel
Assuming the 90 days trading horizon Feng Hsin Steel is expected to under-perform the First Hotel. In addition to that, Feng Hsin is 2.53 times more volatile than First Hotel Co. It trades about -0.23 of its total potential returns per unit of risk. First Hotel Co is currently generating about -0.02 per unit of volatility. If you would invest 1,485 in First Hotel Co on August 24, 2024 and sell it today you would lose (5.00) from holding First Hotel Co or give up 0.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Feng Hsin Steel vs. First Hotel Co
Performance |
| Timeline |
| Feng Hsin Steel |
| First Hotel |
Feng Hsin and First Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Feng Hsin and First Hotel
The main advantage of trading using opposite Feng Hsin and First Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Feng Hsin position performs unexpectedly, First Hotel 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 First Hotel will offset losses from the drop in First Hotel's long position.| Feng Hsin vs. Tung Ho Steel | Feng Hsin vs. U Ming Marine Transport | Feng Hsin vs. TSRC Corp | Feng Hsin vs. Cheng Shin Rubber |
| First Hotel vs. Taiwan Semiconductor Manufacturing | First Hotel vs. Hon Hai Precision | First Hotel vs. MediaTek | First Hotel vs. Chunghwa Telecom 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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