Correlation Between Far EasTone and First Hotel
Can any of the company-specific risk be diversified away by investing in both Far EasTone and First Hotel 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 First Hotel 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 First Hotel Co, you can compare the effects of market volatilities on Far EasTone and First Hotel 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 First Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and First Hotel.
Diversification Opportunities for Far EasTone and First Hotel
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Far and First is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and First Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hotel 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 First Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hotel has no effect on the direction of Far EasTone i.e., Far EasTone and First Hotel go up and down completely randomly.
Pair Corralation between Far EasTone and First Hotel
Assuming the 90 days trading horizon Far EasTone Telecommunications is expected to generate 1.95 times more return on investment than First Hotel. However, Far EasTone is 1.95 times more volatile than First Hotel Co. It trades about 0.07 of its potential returns per unit of risk. First Hotel Co is currently generating about -0.18 per unit of risk. If you would invest 8,860 in Far EasTone Telecommunications on September 3, 2024 and sell it today you would earn a total of 130.00 from holding Far EasTone Telecommunications or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far EasTone Telecommunications vs. First Hotel Co
Performance |
| Timeline |
| Far EasTone Telecomm |
| First Hotel |
Far EasTone and First Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and First Hotel
The main advantage of trading using opposite Far EasTone and First Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, First Hotel 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 First Hotel will offset losses from the drop in First Hotel'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 |
| First Hotel vs. Tainan Spinning Co | First Hotel vs. Chia Her Industrial | First Hotel vs. WiseChip Semiconductor | First Hotel vs. Novatek Microelectronics Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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