Correlation Between Far EasTone and Hsinli Chemical
Can any of the company-specific risk be diversified away by investing in both Far EasTone and Hsinli Chemical 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 Hsinli Chemical 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 Hsinli Chemical Industrial, you can compare the effects of market volatilities on Far EasTone and Hsinli Chemical 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 Hsinli Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and Hsinli Chemical.
Diversification Opportunities for Far EasTone and Hsinli Chemical
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Far and Hsinli is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and Hsinli Chemical Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsinli Chemical Indu 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 Hsinli Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsinli Chemical Indu has no effect on the direction of Far EasTone i.e., Far EasTone and Hsinli Chemical go up and down completely randomly.
Pair Corralation between Far EasTone and Hsinli Chemical
Assuming the 90 days trading horizon Far EasTone is expected to generate 9.5 times less return on investment than Hsinli Chemical. But when comparing it to its historical volatility, Far EasTone Telecommunications is 3.11 times less risky than Hsinli Chemical. It trades about 0.01 of its potential returns per unit of risk. Hsinli Chemical Industrial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,480 in Hsinli Chemical Industrial on November 3, 2024 and sell it today you would earn a total of 350.00 from holding Hsinli Chemical Industrial or generate 7.81% 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. Hsinli Chemical Industrial
Performance |
| Timeline |
| Far EasTone Telecomm |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Hsinli Chemical Indu |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Far EasTone and Hsinli Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and Hsinli Chemical
The main advantage of trading using opposite Far EasTone and Hsinli Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, Hsinli Chemical 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 Hsinli Chemical will offset losses from the drop in Hsinli Chemical's long position.The idea behind Far EasTone Telecommunications and Hsinli Chemical Industrial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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