Correlation Between Far Eastern and Hsin Ba
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Hsin Ba 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 Hsin Ba 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 Hsin Ba Ba, you can compare the effects of market volatilities on Far Eastern and Hsin Ba 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 Hsin Ba. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Hsin Ba.
Diversification Opportunities for Far Eastern and Hsin Ba
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Far and Hsin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Hsin Ba Ba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Ba Ba 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 Hsin Ba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Ba Ba has no effect on the direction of Far Eastern i.e., Far Eastern and Hsin Ba go up and down completely randomly.
Pair Corralation between Far Eastern and Hsin Ba
Assuming the 90 days trading horizon Far Eastern Department is expected to under-perform the Hsin Ba. But the stock apears to be less risky and, when comparing its historical volatility, Far Eastern Department is 2.12 times less risky than Hsin Ba. The stock trades about -0.02 of its potential returns per unit of risk. The Hsin Ba Ba is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 12,150 in Hsin Ba Ba on November 27, 2024 and sell it today you would lose (250.00) from holding Hsin Ba Ba or give up 2.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.25% |
| Values | Daily Returns |
Far Eastern Department vs. Hsin Ba Ba
Performance |
| Timeline |
| Far Eastern Department |
| Hsin Ba Ba |
Far Eastern and Hsin Ba Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Hsin Ba
The main advantage of trading using opposite Far Eastern and Hsin Ba positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Hsin Ba 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 Hsin Ba will offset losses from the drop in Hsin Ba'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 |
| Hsin Ba vs. Great China Metal | Hsin Ba vs. Ton Yi Industrial | Hsin Ba vs. Ching Feng Home | Hsin Ba vs. Choice Development |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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