Correlation Between Far Eastern and China Steel
Can any of the company-specific risk be diversified away by investing in both Far Eastern and China Steel 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 China Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Far Eastern Department and China Steel Corp, you can compare the effects of market volatilities on Far Eastern and China Steel 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 China Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and China Steel.
Diversification Opportunities for Far Eastern and China Steel
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Far and China is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and China Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Steel Corp 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 Department are associated (or correlated) with China Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Steel Corp has no effect on the direction of Far Eastern i.e., Far Eastern and China Steel go up and down completely randomly.
Pair Corralation between Far Eastern and China Steel
Assuming the 90 days trading horizon Far Eastern Department is expected to generate 1.11 times more return on investment than China Steel. However, Far Eastern is 1.11 times more volatile than China Steel Corp. It trades about 0.02 of its potential returns per unit of risk. China Steel Corp is currently generating about -0.04 per unit of risk. If you would invest 2,295 in Far Eastern Department on November 27, 2024 and sell it today you would earn a total of 175.00 from holding Far Eastern Department or generate 7.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Far Eastern Department vs. China Steel Corp
Performance |
| Timeline |
| Far Eastern Department |
| China Steel Corp |
Far Eastern and China Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and China Steel
The main advantage of trading using opposite Far Eastern and China Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, China Steel 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 China Steel will offset losses from the drop in China Steel's long position.| Far Eastern vs. Yulon Motor Co | Far Eastern vs. Chang Hwa Commercial | Far Eastern vs. Sinopac Financial Holdings | Far Eastern vs. Taiwan Glass Ind |
| China Steel vs. Formosa Plastics Corp | China Steel vs. Chunghwa Telecom Co | China Steel vs. Nan Ya Plastics | China Steel vs. Cathay Financial Holding |
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.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |