Correlation Between Taiwan Weighted and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted 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 Taiwan Weighted and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Far Eastern New, you can compare the effects of market volatilities on Taiwan Weighted 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 Taiwan Weighted with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Far Eastern.
Diversification Opportunities for Taiwan Weighted and Far Eastern
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and Far is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted 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 Taiwan Weighted 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 Taiwan Weighted 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 Taiwan Weighted i.e., Taiwan Weighted and Far Eastern go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Far Eastern
Assuming the 90 days trading horizon Taiwan Weighted is expected to generate 0.83 times more return on investment than Far Eastern. However, Taiwan Weighted is 1.2 times less risky than Far Eastern. It trades about 0.09 of its potential returns per unit of risk. Far Eastern New is currently generating about 0.03 per unit of risk. If you would invest 1,498,074 in Taiwan Weighted on August 26, 2024 and sell it today you would earn a total of 792,358 from holding Taiwan Weighted or generate 52.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.75% |
| Values | Daily Returns |
Taiwan Weighted vs. Far Eastern New
Performance |
| Timeline |
Taiwan Weighted and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Far Eastern New
Pair trading matchups for Far Eastern
Pair Trading with Taiwan Weighted and Far Eastern
The main advantage of trading using opposite Taiwan Weighted and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted 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.| Taiwan Weighted vs. Wei Chuan Foods | Taiwan Weighted vs. Jetwell Computer Co | Taiwan Weighted vs. Syscom Computer Engineering | Taiwan Weighted vs. Unitech Computer Co |
| Far Eastern vs. Sunny Friend Environmental | Far Eastern vs. TTET Union Corp | Far Eastern vs. ECOVE Environment Corp | Far Eastern vs. Yulon Finance 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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