Correlation Between Far Eastern and Da Cin
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Da Cin 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 Da Cin 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 Da Cin Construction Co, you can compare the effects of market volatilities on Far Eastern and Da Cin 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 Da Cin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Da Cin.
Diversification Opportunities for Far Eastern and Da Cin
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Far and 2535 is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Da Cin Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Cin Construction 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 Da Cin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Cin Construction has no effect on the direction of Far Eastern i.e., Far Eastern and Da Cin go up and down completely randomly.
Pair Corralation between Far Eastern and Da Cin
Assuming the 90 days trading horizon Far Eastern Department is expected to generate 1.75 times more return on investment than Da Cin. However, Far Eastern is 1.75 times more volatile than Da Cin Construction Co. It trades about 0.51 of its potential returns per unit of risk. Da Cin Construction Co is currently generating about 0.41 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern Department vs. Da Cin Construction Co
Performance |
| Timeline |
| Far Eastern Department |
| Da Cin Construction |
Far Eastern and Da Cin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Da Cin
The main advantage of trading using opposite Far Eastern and Da Cin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Da Cin 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 Da Cin will offset losses from the drop in Da Cin'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 |
| Da Cin vs. Huaku Development Co | Da Cin vs. Highwealth Construction Corp | Da Cin vs. Kindom Construction Corp | Da Cin vs. Kedge Construction 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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