Correlation Between Farglory Land and Hotai
Can any of the company-specific risk be diversified away by investing in both Farglory Land and Hotai 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 Farglory Land and Hotai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farglory Land Development and Hotai Motor Co, you can compare the effects of market volatilities on Farglory Land and Hotai 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 Farglory Land with a short position of Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farglory Land and Hotai.
Diversification Opportunities for Farglory Land and Hotai
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Farglory and Hotai is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Farglory Land Development and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor and Farglory Land 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 Farglory Land Development are associated (or correlated) with Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Farglory Land i.e., Farglory Land and Hotai go up and down completely randomly.
Pair Corralation between Farglory Land and Hotai
Assuming the 90 days trading horizon Farglory Land Development is expected to generate 2.04 times more return on investment than Hotai. However, Farglory Land is 2.04 times more volatile than Hotai Motor Co. It trades about -0.01 of its potential returns per unit of risk. Hotai Motor Co is currently generating about -0.17 per unit of risk. If you would invest 6,650 in Farglory Land Development on September 1, 2024 and sell it today you would lose (100.00) from holding Farglory Land Development or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Farglory Land Development vs. Hotai Motor Co
Performance |
| Timeline |
| Farglory Land Development |
| Hotai Motor |
Farglory Land and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Farglory Land and Hotai
The main advantage of trading using opposite Farglory Land and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farglory Land position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Farglory Land vs. Ruentex Development Co | Farglory Land vs. CTCI Corp | Farglory Land vs. Information Technology Total | Farglory Land vs. Ennoconn Corp |
| Hotai vs. President Chain Store | Hotai vs. Formosa Petrochemical Corp | Hotai vs. Cheng Shin Rubber | Hotai vs. Formosa Chemicals Fibre |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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