Correlation Between Far EasTone and International CSRC
Can any of the company-specific risk be diversified away by investing in both Far EasTone and International CSRC 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 International CSRC 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 International CSRC Investment, you can compare the effects of market volatilities on Far EasTone and International CSRC 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 International CSRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and International CSRC.
Diversification Opportunities for Far EasTone and International CSRC
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Far and International is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and International CSRC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International CSRC 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 International CSRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International CSRC has no effect on the direction of Far EasTone i.e., Far EasTone and International CSRC go up and down completely randomly.
Pair Corralation between Far EasTone and International CSRC
Assuming the 90 days trading horizon Far EasTone Telecommunications is expected to generate 1.02 times more return on investment than International CSRC. However, Far EasTone is 1.02 times more volatile than International CSRC Investment. It trades about 0.06 of its potential returns per unit of risk. International CSRC Investment is currently generating about -0.09 per unit of risk. If you would invest 8,350 in Far EasTone Telecommunications on August 29, 2024 and sell it today you would earn a total of 820.00 from holding Far EasTone Telecommunications or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far EasTone Telecommunications vs. International CSRC Investment
Performance |
| Timeline |
| Far EasTone Telecomm |
| International CSRC |
Far EasTone and International CSRC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and International CSRC
The main advantage of trading using opposite Far EasTone and International CSRC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, International CSRC 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 International CSRC will offset losses from the drop in International CSRC's long position.| Far EasTone vs. Taiwan Mobile Co | Far EasTone vs. Chunghwa Telecom Co | Far EasTone vs. President Chain Store | Far EasTone vs. Formosa Petrochemical Corp |
| International CSRC vs. Cheng Shin Rubber | International CSRC vs. TSRC Corp | International CSRC vs. Taiwan Cement Corp | International CSRC vs. China Steel Chemical |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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