Correlation Between Far Eastern and Cleanaway
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Cleanaway 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 Cleanaway 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 Cleanaway Co, you can compare the effects of market volatilities on Far Eastern and Cleanaway 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 Cleanaway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Cleanaway.
Diversification Opportunities for Far Eastern and Cleanaway
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Far and Cleanaway is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Cleanaway Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleanaway 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 Cleanaway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleanaway has no effect on the direction of Far Eastern i.e., Far Eastern and Cleanaway go up and down completely randomly.
Pair Corralation between Far Eastern and Cleanaway
Assuming the 90 days trading horizon Far Eastern Department is expected to generate 1.54 times more return on investment than Cleanaway. However, Far Eastern is 1.54 times more volatile than Cleanaway Co. It trades about 0.04 of its potential returns per unit of risk. Cleanaway Co is currently generating about 0.01 per unit of risk. If you would invest 2,015 in Far Eastern Department on August 29, 2024 and sell it today you would earn a total of 510.00 from holding Far Eastern Department or generate 25.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern Department vs. Cleanaway Co
Performance |
| Timeline |
| Far Eastern Department |
| Cleanaway |
Far Eastern and Cleanaway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Cleanaway
The main advantage of trading using opposite Far Eastern and Cleanaway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Cleanaway 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 Cleanaway will offset losses from the drop in Cleanaway'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 |
| Cleanaway vs. Yulon Motor Co | Cleanaway vs. Far Eastern Department | Cleanaway vs. China Steel Corp | Cleanaway 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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