Correlation Between Far EasTone and SuperAlloy Industrial
Can any of the company-specific risk be diversified away by investing in both Far EasTone and SuperAlloy Industrial 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 EasTone and SuperAlloy Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Far EasTone Telecommunications and SuperAlloy Industrial Co,, you can compare the effects of market volatilities on Far EasTone and SuperAlloy Industrial 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 EasTone with a short position of SuperAlloy Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and SuperAlloy Industrial.
Diversification Opportunities for Far EasTone and SuperAlloy Industrial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Far and SuperAlloy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and SuperAlloy Industrial Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SuperAlloy Industrial Co, and Far EasTone 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 EasTone Telecommunications are associated (or correlated) with SuperAlloy Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SuperAlloy Industrial Co, has no effect on the direction of Far EasTone i.e., Far EasTone and SuperAlloy Industrial go up and down completely randomly.
Pair Corralation between Far EasTone and SuperAlloy Industrial
Assuming the 90 days trading horizon Far EasTone Telecommunications is expected to generate 0.51 times more return on investment than SuperAlloy Industrial. However, Far EasTone Telecommunications is 1.97 times less risky than SuperAlloy Industrial. It trades about 0.06 of its potential returns per unit of risk. SuperAlloy Industrial Co, is currently generating about 0.01 per unit of risk. If you would invest 7,870 in Far EasTone Telecommunications on September 4, 2024 and sell it today you would earn a total of 1,280 from holding Far EasTone Telecommunications or generate 16.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far EasTone Telecommunications vs. SuperAlloy Industrial Co,
Performance |
| Timeline |
| Far EasTone Telecomm |
| SuperAlloy Industrial Co, |
Far EasTone and SuperAlloy Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and SuperAlloy Industrial
The main advantage of trading using opposite Far EasTone and SuperAlloy Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, SuperAlloy Industrial 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 SuperAlloy Industrial will offset losses from the drop in SuperAlloy Industrial's long position.| Far EasTone vs. China Steel Corp | Far EasTone vs. Formosa Plastics Corp | Far EasTone vs. Cathay Financial Holding | Far EasTone vs. Fubon Financial Holding |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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