Correlation Between Sunny Friend and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Sunny Friend and Far Eastern 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 Sunny Friend and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunny Friend Environmental and Far Eastern New, you can compare the effects of market volatilities on Sunny Friend and Far Eastern 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 Sunny Friend with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Friend and Far Eastern.
Diversification Opportunities for Sunny Friend and Far Eastern
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sunny and Far is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Friend Environmental and Far Eastern New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern New and Sunny Friend 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 Sunny Friend Environmental are associated (or correlated) with Far Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far Eastern New has no effect on the direction of Sunny Friend i.e., Sunny Friend and Far Eastern go up and down completely randomly.
Pair Corralation between Sunny Friend and Far Eastern
Assuming the 90 days trading horizon Sunny Friend Environmental is expected to under-perform the Far Eastern. In addition to that, Sunny Friend is 1.36 times more volatile than Far Eastern New. It trades about -0.04 of its total potential returns per unit of risk. Far Eastern New is currently generating about 0.02 per unit of volatility. If you would invest 3,320 in Far Eastern New on August 30, 2024 and sell it today you would earn a total of 180.00 from holding Far Eastern New or generate 5.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Friend Environmental vs. Far Eastern New
Performance |
| Timeline |
| Sunny Friend Environ |
| Far Eastern New |
Sunny Friend and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Friend and Far Eastern
The main advantage of trading using opposite Sunny Friend and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Friend position performs unexpectedly, Far Eastern 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 Eastern will offset losses from the drop in Far Eastern's long position.| Sunny Friend vs. Cleanaway Co | Sunny Friend vs. Taiwan Secom Co | Sunny Friend vs. ECOVE Environment Corp | Sunny Friend vs. TTET Union Corp |
| Far Eastern vs. Yulon Motor Co | Far Eastern vs. Far Eastern Department | Far Eastern vs. China Steel Corp | Far Eastern vs. Chang Hwa Commercial |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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