Correlation Between Far Eastern and Yang Ming
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Yang Ming 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 Yang Ming 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 Yang Ming Marine, you can compare the effects of market volatilities on Far Eastern and Yang Ming 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 Yang Ming. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Yang Ming.
Diversification Opportunities for Far Eastern and Yang Ming
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Far and Yang is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Yang Ming Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yang Ming Marine 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 Yang Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yang Ming Marine has no effect on the direction of Far Eastern i.e., Far Eastern and Yang Ming go up and down completely randomly.
Pair Corralation between Far Eastern and Yang Ming
Assuming the 90 days trading horizon Far Eastern Department is expected to under-perform the Yang Ming. But the stock apears to be less risky and, when comparing its historical volatility, Far Eastern Department is 3.06 times less risky than Yang Ming. The stock trades about -0.13 of its potential returns per unit of risk. The Yang Ming Marine is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 6,810 in Yang Ming Marine on August 29, 2024 and sell it today you would earn a total of 810.00 from holding Yang Ming Marine or generate 11.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Far Eastern Department vs. Yang Ming Marine
Performance |
| Timeline |
| Far Eastern Department |
| Yang Ming Marine |
Far Eastern and Yang Ming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Yang Ming
The main advantage of trading using opposite Far Eastern and Yang Ming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Yang Ming 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 Yang Ming will offset losses from the drop in Yang Ming'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 |
| Yang Ming vs. Yulon Motor Co | Yang Ming vs. Far Eastern Department | Yang Ming vs. China Steel Corp | Yang Ming vs. Chang Hwa Commercial |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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