Correlation Between Far Eastern and Mercuries Associates
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Mercuries Associates 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 Mercuries Associates 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 Mercuries Associates Holding, you can compare the effects of market volatilities on Far Eastern and Mercuries Associates 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 Mercuries Associates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Mercuries Associates.
Diversification Opportunities for Far Eastern and Mercuries Associates
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Far and Mercuries is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Mercuries Associates Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercuries Associates 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 Mercuries Associates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercuries Associates has no effect on the direction of Far Eastern i.e., Far Eastern and Mercuries Associates go up and down completely randomly.
Pair Corralation between Far Eastern and Mercuries Associates
Assuming the 90 days trading horizon Far Eastern Department is expected to generate 0.55 times more return on investment than Mercuries Associates. However, Far Eastern Department is 1.83 times less risky than Mercuries Associates. It trades about -0.13 of its potential returns per unit of risk. Mercuries Associates Holding is currently generating about -0.25 per unit of risk. If you would invest 2,605 in Far Eastern Department on August 27, 2024 and sell it today you would lose (55.00) from holding Far Eastern Department or give up 2.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern Department vs. Mercuries Associates Holding
Performance |
| Timeline |
| Far Eastern Department |
| Mercuries Associates |
Far Eastern and Mercuries Associates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Mercuries Associates
The main advantage of trading using opposite Far Eastern and Mercuries Associates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Mercuries Associates 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 Mercuries Associates will offset losses from the drop in Mercuries Associates' long position.| Far Eastern vs. Taiwan Semiconductor Manufacturing | Far Eastern vs. Hon Hai Precision | Far Eastern vs. MediaTek | Far Eastern vs. Chunghwa Telecom Co |
| Mercuries Associates vs. Far Eastern Department | Mercuries Associates vs. Taiwan Tea Corp | Mercuries Associates vs. Test Rite International | Mercuries Associates vs. Ruentex Industries |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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