Correlation Between Taichung Commercial and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Taichung Commercial 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 Taichung Commercial and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taichung Commercial Bank and Far Eastern International, you can compare the effects of market volatilities on Taichung Commercial 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 Taichung Commercial with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taichung Commercial and Far Eastern.
Diversification Opportunities for Taichung Commercial and Far Eastern
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Taichung and Far is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Taichung Commercial Bank and Far Eastern International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern International and Taichung Commercial 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 Taichung Commercial Bank 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 International has no effect on the direction of Taichung Commercial i.e., Taichung Commercial and Far Eastern go up and down completely randomly.
Pair Corralation between Taichung Commercial and Far Eastern
Assuming the 90 days trading horizon Taichung Commercial Bank is expected to generate 1.07 times more return on investment than Far Eastern. However, Taichung Commercial is 1.07 times more volatile than Far Eastern International. It trades about 0.27 of its potential returns per unit of risk. Far Eastern International is currently generating about 0.13 per unit of risk. If you would invest 1,775 in Taichung Commercial Bank on September 1, 2024 and sell it today you would earn a total of 100.00 from holding Taichung Commercial Bank or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Taichung Commercial Bank vs. Far Eastern International
Performance |
| Timeline |
| Taichung Commercial Bank |
| Far Eastern International |
Taichung Commercial and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taichung Commercial and Far Eastern
The main advantage of trading using opposite Taichung Commercial and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taichung Commercial 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.| Taichung Commercial vs. Central Reinsurance Corp | Taichung Commercial vs. Huaku Development Co | Taichung Commercial vs. Fubon Financial Holding | Taichung Commercial vs. CTBC Financial Holding |
| Far Eastern vs. Chang Hwa Commercial | Far Eastern vs. Taiwan Business Bank | Far Eastern vs. Sinopac Financial Holdings | Far Eastern vs. Taichung Commercial Bank |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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