Correlation Between Wan Hai and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Wan Hai 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 Wan Hai and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wan Hai Lines and Far Eastern Department, you can compare the effects of market volatilities on Wan Hai 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 Wan Hai with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Far Eastern.
Diversification Opportunities for Wan Hai and Far Eastern
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wan and Far is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines 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 Wan Hai 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 Wan Hai Lines 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 Wan Hai i.e., Wan Hai and Far Eastern go up and down completely randomly.
Pair Corralation between Wan Hai and Far Eastern
Assuming the 90 days trading horizon Wan Hai Lines is expected to generate 4.18 times more return on investment than Far Eastern. However, Wan Hai is 4.18 times more volatile than Far Eastern Department. It trades about 0.12 of its potential returns per unit of risk. Far Eastern Department is currently generating about -0.28 per unit of risk. If you would invest 8,690 in Wan Hai Lines on August 26, 2024 and sell it today you would earn a total of 670.00 from holding Wan Hai Lines or generate 7.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wan Hai Lines vs. Far Eastern Department
Performance |
| Timeline |
| Wan Hai Lines |
| Far Eastern Department |
Wan Hai and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wan Hai and Far Eastern
The main advantage of trading using opposite Wan Hai and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai 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.| Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
| Far Eastern vs. Taiwan Semiconductor Manufacturing | Far Eastern vs. Hon Hai Precision | Far Eastern vs. MediaTek | Far Eastern 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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