Correlation Between Far Eastern and Sinopac Financial
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Sinopac Financial 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 Far Eastern and Sinopac Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Far Eastern International and Sinopac Financial Holdings, you can compare the effects of market volatilities on Far Eastern and Sinopac Financial 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 Far Eastern with a short position of Sinopac Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Sinopac Financial.
Diversification Opportunities for Far Eastern and Sinopac Financial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Far and Sinopac is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern International and Sinopac Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopac Financial and Far Eastern 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 Far Eastern International are associated (or correlated) with Sinopac Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopac Financial has no effect on the direction of Far Eastern i.e., Far Eastern and Sinopac Financial go up and down completely randomly.
Pair Corralation between Far Eastern and Sinopac Financial
Assuming the 90 days trading horizon Far Eastern International is expected to generate 1.61 times more return on investment than Sinopac Financial. However, Far Eastern is 1.61 times more volatile than Sinopac Financial Holdings. It trades about 0.18 of its potential returns per unit of risk. Sinopac Financial Holdings is currently generating about -0.05 per unit of risk. If you would invest 1,315 in Far Eastern International on November 3, 2024 and sell it today you would earn a total of 30.00 from holding Far Eastern International or generate 2.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern International vs. Sinopac Financial Holdings
Performance |
| Timeline |
| Far Eastern International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Sinopac Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Far Eastern and Sinopac Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Sinopac Financial
The main advantage of trading using opposite Far Eastern and Sinopac Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Sinopac Financial 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 Sinopac Financial will offset losses from the drop in Sinopac Financial's long position.The idea behind Far Eastern International and Sinopac Financial Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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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