Correlation Between Far Eastern and Sunspring Metal
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Sunspring Metal 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 Sunspring Metal 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 Sunspring Metal Corp, you can compare the effects of market volatilities on Far Eastern and Sunspring Metal 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 Sunspring Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Sunspring Metal.
Diversification Opportunities for Far Eastern and Sunspring Metal
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Far and Sunspring is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Sunspring Metal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunspring Metal 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 Sunspring Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunspring Metal Corp has no effect on the direction of Far Eastern i.e., Far Eastern and Sunspring Metal go up and down completely randomly.
Pair Corralation between Far Eastern and Sunspring Metal
Assuming the 90 days trading horizon Far Eastern Department is expected to generate 0.88 times more return on investment than Sunspring Metal. However, Far Eastern Department is 1.13 times less risky than Sunspring Metal. It trades about 0.51 of its potential returns per unit of risk. Sunspring Metal Corp is currently generating about -0.06 per unit of risk. If you would invest 2,200 in Far Eastern Department on November 27, 2024 and sell it today you would earn a total of 270.00 from holding Far Eastern Department or generate 12.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern Department vs. Sunspring Metal Corp
Performance |
| Timeline |
| Far Eastern Department |
| Sunspring Metal Corp |
Far Eastern and Sunspring Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Sunspring Metal
The main advantage of trading using opposite Far Eastern and Sunspring Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Sunspring Metal 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 Sunspring Metal will offset losses from the drop in Sunspring Metal'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 |
| Sunspring Metal vs. Makalot Industrial Co | Sunspring Metal vs. Eternal Materials Co | Sunspring Metal vs. Feng Tay Enterprises | Sunspring Metal vs. Taiwan Fu Hsing |
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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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