Correlation Between Far Eastern and Les Enphants
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Les Enphants 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 Les Enphants 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 Les Enphants Co, you can compare the effects of market volatilities on Far Eastern and Les Enphants 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 Les Enphants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Les Enphants.
Diversification Opportunities for Far Eastern and Les Enphants
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Far and Les is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Les Enphants Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Les Enphants 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 Les Enphants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Les Enphants has no effect on the direction of Far Eastern i.e., Far Eastern and Les Enphants go up and down completely randomly.
Pair Corralation between Far Eastern and Les Enphants
Assuming the 90 days trading horizon Far Eastern is expected to generate 1.61 times less return on investment than Les Enphants. But when comparing it to its historical volatility, Far Eastern Department is 2.4 times less risky than Les Enphants. It trades about 0.04 of its potential returns per unit of risk. Les Enphants Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 710.00 in Les Enphants Co on September 3, 2024 and sell it today you would earn a total of 156.00 from holding Les Enphants Co or generate 21.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern Department vs. Les Enphants Co
Performance |
| Timeline |
| Far Eastern Department |
| Les Enphants |
Far Eastern and Les Enphants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Les Enphants
The main advantage of trading using opposite Far Eastern and Les Enphants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Les Enphants 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 Les Enphants will offset losses from the drop in Les Enphants' long position.| Far Eastern vs. Tainan Spinning Co | Far Eastern vs. Chia Her Industrial | Far Eastern vs. WiseChip Semiconductor | Far Eastern vs. Novatek Microelectronics Corp |
| Les Enphants vs. Far Eastern Department | Les Enphants vs. Shin Shin Co | Les Enphants vs. First Hotel Co | Les Enphants vs. Hung Sheng Construction |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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