Correlation Between Taiwan Glass and Far Eastern

Can any of the company-specific risk be diversified away by investing in both Taiwan Glass 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 Glass 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 Glass Ind and Far Eastern Department, you can compare the effects of market volatilities on Taiwan Glass 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 Glass with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Glass and Far Eastern.

Diversification Opportunities for Taiwan Glass and Far Eastern

-0.71

Correlation Coefficient

Taiwan Glass  Far Eastern

Pay attention - limited upside

The 3 months correlation between Taiwan and Far is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Glass Ind and Far Eastern Department in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern Department and Taiwan Glass 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 Glass Ind 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 Department has no effect on the direction of Taiwan Glass i.e., Taiwan Glass and Far Eastern go up and down completely randomly.

Pair Corralation between Taiwan Glass and Far Eastern

Assuming the 90 days trading horizon Taiwan Glass Ind is expected to generate 3.29 times more return on investment than Far Eastern. However, Taiwan Glass is 3.29 times more volatile than Far Eastern Department. It trades about 0.13 of its potential returns per unit of risk. Far Eastern Department is currently generating about -0.21 per unit of risk. If you would invest  1,530  in Taiwan Glass Ind on September 9, 2024 and sell it today you would earn a total of  385.00  from holding Taiwan Glass Ind or generate 25.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Taiwan Glass Ind  vs.  Far Eastern Department

Taiwan Glass Ind

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Glass Ind are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Glass showed solid returns over the last few months and may actually be approaching a breakup point.

Far Eastern Department

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Far Eastern Department has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Taiwan Glass and Far Eastern

The main advantage of trading using opposite Taiwan Glass and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Glass 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.

The idea behind Taiwan Glass Ind and Far Eastern Department pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.