Correlation Between Far EasTone and Asia Metal
Can any of the company-specific risk be diversified away by investing in both Far EasTone and Asia Metal 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 Asia Metal 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 Asia Metal Industries, you can compare the effects of market volatilities on Far EasTone and Asia Metal 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 Asia Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and Asia Metal.
Diversification Opportunities for Far EasTone and Asia Metal
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Far and Asia is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and Asia Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Metal Industries 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 Asia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Metal Industries has no effect on the direction of Far EasTone i.e., Far EasTone and Asia Metal go up and down completely randomly.
Pair Corralation between Far EasTone and Asia Metal
Assuming the 90 days trading horizon Far EasTone Telecommunications is expected to generate 0.59 times more return on investment than Asia Metal. However, Far EasTone Telecommunications is 1.69 times less risky than Asia Metal. It trades about -0.21 of its potential returns per unit of risk. Asia Metal Industries is currently generating about -0.26 per unit of risk. If you would invest 9,140 in Far EasTone Telecommunications on October 23, 2024 and sell it today you would lose (360.00) from holding Far EasTone Telecommunications or give up 3.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far EasTone Telecommunications vs. Asia Metal Industries
Performance |
| Timeline |
| Far EasTone Telecomm |
| Asia Metal Industries |
Far EasTone and Asia Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and Asia Metal
The main advantage of trading using opposite Far EasTone and Asia Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, Asia Metal 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 Asia Metal will offset losses from the drop in Asia Metal'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 |
| Asia Metal vs. Hannstar Display Corp | Asia Metal vs. Genovate Biotechnology Co | Asia Metal vs. Far EasTone Telecommunications | Asia Metal vs. Sunmax Biotechnology 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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