Correlation Between Far EasTone and Tainet Communication
Can any of the company-specific risk be diversified away by investing in both Far EasTone and Tainet Communication 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 Tainet Communication 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 Tainet Communication System, you can compare the effects of market volatilities on Far EasTone and Tainet Communication 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 Tainet Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and Tainet Communication.
Diversification Opportunities for Far EasTone and Tainet Communication
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Far and Tainet is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and Tainet Communication System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainet Communication 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 Tainet Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainet Communication has no effect on the direction of Far EasTone i.e., Far EasTone and Tainet Communication go up and down completely randomly.
Pair Corralation between Far EasTone and Tainet Communication
Assuming the 90 days trading horizon Far EasTone is expected to generate 2.12 times less return on investment than Tainet Communication. But when comparing it to its historical volatility, Far EasTone Telecommunications is 2.73 times less risky than Tainet Communication. It trades about 0.06 of its potential returns per unit of risk. Tainet Communication System is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,050 in Tainet Communication System on August 26, 2024 and sell it today you would earn a total of 2,920 from holding Tainet Communication System or generate 57.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far EasTone Telecommunications vs. Tainet Communication System
Performance |
| Timeline |
| Far EasTone Telecomm |
| Tainet Communication |
Far EasTone and Tainet Communication Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and Tainet Communication
The main advantage of trading using opposite Far EasTone and Tainet Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, Tainet Communication 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 Tainet Communication will offset losses from the drop in Tainet Communication's long position.| Far EasTone vs. Chunghwa Telecom Co | Far EasTone vs. CTBC Financial Holding | Far EasTone vs. Fubon Financial Holding | Far EasTone vs. President Chain Store |
| Tainet Communication vs. Accton Technology Corp | Tainet Communication vs. Arcadyan Technology Corp | Tainet Communication vs. Advanced Ceramic X | Tainet Communication vs. Gemtek Technology Co |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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