Correlation Between BES Engineering and Far Eastern
Can any of the company-specific risk be diversified away by investing in both BES Engineering 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 BES Engineering and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BES Engineering Co and Far Eastern Department, you can compare the effects of market volatilities on BES Engineering 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 BES Engineering with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of BES Engineering and Far Eastern.
Diversification Opportunities for BES Engineering and Far Eastern
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BES and Far is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BES Engineering Co and Far Eastern Department in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern Department and BES Engineering 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 BES Engineering 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 Department has no effect on the direction of BES Engineering i.e., BES Engineering and Far Eastern go up and down completely randomly.
Pair Corralation between BES Engineering and Far Eastern
Assuming the 90 days trading horizon BES Engineering Co is expected to under-perform the Far Eastern. In addition to that, BES Engineering is 1.48 times more volatile than Far Eastern Department. It trades about -0.14 of its total potential returns per unit of risk. Far Eastern Department is currently generating about -0.12 per unit of volatility. If you would invest 3,160 in Far Eastern Department on September 1, 2024 and sell it today you would lose (640.00) from holding Far Eastern Department or give up 20.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BES Engineering Co vs. Far Eastern Department
Performance |
| Timeline |
| BES Engineering |
| Far Eastern Department |
BES Engineering and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BES Engineering and Far Eastern
The main advantage of trading using opposite BES Engineering and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BES Engineering 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.| BES Engineering vs. Hung Sheng Construction | BES Engineering vs. Taiwan Glass Ind | BES Engineering vs. China Petrochemical Development | BES Engineering vs. Taiwan Tea Corp |
| Far Eastern vs. Chaintech Technology Corp | Far Eastern vs. AVerMedia Technologies | Far Eastern vs. Avision | Far Eastern vs. Clevo 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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