Correlation Between Arima Communications and Far EasTone
Can any of the company-specific risk be diversified away by investing in both Arima Communications 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 Arima Communications and Far EasTone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arima Communications Corp and Far EasTone Telecommunications, you can compare the effects of market volatilities on Arima Communications 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 Arima Communications with a short position of Far EasTone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arima Communications and Far EasTone.
Diversification Opportunities for Arima Communications and Far EasTone
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Arima and Far is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Arima Communications Corp 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 Arima Communications 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 Arima Communications Corp 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 Arima Communications i.e., Arima Communications and Far EasTone go up and down completely randomly.
Pair Corralation between Arima Communications and Far EasTone
Assuming the 90 days trading horizon Arima Communications Corp is expected to generate 27.4 times more return on investment than Far EasTone. However, Arima Communications is 27.4 times more volatile than Far EasTone Telecommunications. It trades about 0.1 of its potential returns per unit of risk. Far EasTone Telecommunications is currently generating about 0.06 per unit of risk. If you would invest 372.00 in Arima Communications Corp on September 3, 2024 and sell it today you would earn a total of 2,058 from holding Arima Communications Corp or generate 553.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arima Communications Corp vs. Far EasTone Telecommunications
Performance |
| Timeline |
| Arima Communications Corp |
| Far EasTone Telecomm |
Arima Communications and Far EasTone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arima Communications and Far EasTone
The main advantage of trading using opposite Arima Communications and Far EasTone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arima Communications 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.| Arima Communications vs. Taiwan Semiconductor Manufacturing | Arima Communications vs. Yang Ming Marine | Arima Communications vs. ASE Industrial Holding | Arima Communications vs. AU Optronics |
| Far EasTone vs. China Steel Corp | Far EasTone vs. Formosa Plastics Corp | Far EasTone vs. Cathay Financial Holding | Far EasTone vs. Fubon Financial Holding |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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