Correlation Between Shanghai Commercial and Far EasTone
Can any of the company-specific risk be diversified away by investing in both Shanghai Commercial and Far EasTone 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 Shanghai Commercial and Far EasTone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Commercial Savings and Far EasTone Telecommunications, you can compare the effects of market volatilities on Shanghai Commercial and Far EasTone 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 Shanghai Commercial with a short position of Far EasTone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Commercial and Far EasTone.
Diversification Opportunities for Shanghai Commercial and Far EasTone
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Shanghai and Far is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Commercial Savings and Far EasTone Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far EasTone Telecomm and Shanghai Commercial 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 Shanghai Commercial Savings are associated (or correlated) with Far EasTone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far EasTone Telecomm has no effect on the direction of Shanghai Commercial i.e., Shanghai Commercial and Far EasTone go up and down completely randomly.
Pair Corralation between Shanghai Commercial and Far EasTone
Assuming the 90 days trading horizon Shanghai Commercial Savings is expected to under-perform the Far EasTone. In addition to that, Shanghai Commercial is 1.01 times more volatile than Far EasTone Telecommunications. It trades about -0.1 of its total potential returns per unit of risk. Far EasTone Telecommunications is currently generating about 0.06 per unit of volatility. If you would invest 8,350 in Far EasTone Telecommunications on August 29, 2024 and sell it today you would earn a total of 820.00 from holding Far EasTone Telecommunications or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shanghai Commercial Savings vs. Far EasTone Telecommunications
Performance |
| Timeline |
| Shanghai Commercial |
| Far EasTone Telecomm |
Shanghai Commercial and Far EasTone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shanghai Commercial and Far EasTone
The main advantage of trading using opposite Shanghai Commercial and Far EasTone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Commercial position performs unexpectedly, Far EasTone 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 Far EasTone will offset losses from the drop in Far EasTone's long position.| Shanghai Commercial vs. Taiwan Secom Co | Shanghai Commercial vs. TTET Union Corp | Shanghai Commercial vs. China Steel Chemical | Shanghai Commercial vs. Taiwan Shin Kong |
| Far EasTone vs. Taiwan Mobile Co | Far EasTone vs. Chunghwa Telecom Co | Far EasTone vs. President Chain Store | Far EasTone vs. Formosa Petrochemical Corp |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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