Correlation Between Far Eastern and Taiwan Shin
Can any of the company-specific risk be diversified away by investing in both Far Eastern and Taiwan Shin 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 Taiwan Shin 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 Taiwan Shin Kong, you can compare the effects of market volatilities on Far Eastern and Taiwan Shin 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 Taiwan Shin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Taiwan Shin.
Diversification Opportunities for Far Eastern and Taiwan Shin
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Far and Taiwan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern Department and Taiwan Shin Kong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Shin Kong 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 Taiwan Shin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Shin Kong has no effect on the direction of Far Eastern i.e., Far Eastern and Taiwan Shin go up and down completely randomly.
Pair Corralation between Far Eastern and Taiwan Shin
Assuming the 90 days trading horizon Far Eastern Department is expected to under-perform the Taiwan Shin. In addition to that, Far Eastern is 1.7 times more volatile than Taiwan Shin Kong. It trades about -0.09 of its total potential returns per unit of risk. Taiwan Shin Kong is currently generating about -0.06 per unit of volatility. If you would invest 4,130 in Taiwan Shin Kong on September 1, 2024 and sell it today you would lose (25.00) from holding Taiwan Shin Kong or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far Eastern Department vs. Taiwan Shin Kong
Performance |
| Timeline |
| Far Eastern Department |
| Taiwan Shin Kong |
Far Eastern and Taiwan Shin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far Eastern and Taiwan Shin
The main advantage of trading using opposite Far Eastern and Taiwan Shin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far Eastern position performs unexpectedly, Taiwan Shin 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 Taiwan Shin will offset losses from the drop in Taiwan Shin's long position.| Far Eastern vs. Chaintech Technology Corp | Far Eastern vs. AVerMedia Technologies | Far Eastern vs. Avision | Far Eastern vs. Clevo Co |
| Taiwan Shin vs. Taiwan Secom Co | Taiwan Shin vs. Yulon Finance Corp | Taiwan Shin vs. CHC Resources Corp | Taiwan Shin vs. Nak Sealing Technologies |
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 Stocks Directory module to find actively traded stocks across global markets.
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