Correlation Between Far EasTone and Ma Kuang
Can any of the company-specific risk be diversified away by investing in both Far EasTone and Ma Kuang 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 Ma Kuang 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 Ma Kuang Healthcare, you can compare the effects of market volatilities on Far EasTone and Ma Kuang 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 Ma Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and Ma Kuang.
Diversification Opportunities for Far EasTone and Ma Kuang
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Far and 4139 is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and Ma Kuang Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ma Kuang Healthcare 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 Ma Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ma Kuang Healthcare has no effect on the direction of Far EasTone i.e., Far EasTone and Ma Kuang go up and down completely randomly.
Pair Corralation between Far EasTone and Ma Kuang
Assuming the 90 days trading horizon Far EasTone Telecommunications is expected to generate 0.82 times more return on investment than Ma Kuang. However, Far EasTone Telecommunications is 1.21 times less risky than Ma Kuang. It trades about -0.04 of its potential returns per unit of risk. Ma Kuang Healthcare is currently generating about -0.25 per unit of risk. If you would invest 8,880 in Far EasTone Telecommunications on November 3, 2024 and sell it today you would lose (70.00) from holding Far EasTone Telecommunications or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far EasTone Telecommunications vs. Ma Kuang Healthcare
Performance |
| Timeline |
| Far EasTone Telecomm |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Ma Kuang Healthcare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Far EasTone and Ma Kuang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and Ma Kuang
The main advantage of trading using opposite Far EasTone and Ma Kuang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, Ma Kuang 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 Ma Kuang will offset losses from the drop in Ma Kuang's long position.The idea behind Far EasTone Telecommunications and Ma Kuang Healthcare pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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