Correlation Between Avision and Far Eastern

Can any of the company-specific risk be diversified away by investing in both Avision 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 Avision and Far Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avision and Far Eastern Department, you can compare the effects of market volatilities on Avision 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 Avision with a short position of Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avision and Far Eastern.

Diversification Opportunities for Avision and Far Eastern

0.61

Correlation Coefficient

Avision  Far Eastern

Poor diversification

The 3 months correlation between Avision and Far is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Avision 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 Avision 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 Avision 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 Avision i.e., Avision and Far Eastern go up and down completely randomly.

Pair Corralation between Avision and Far Eastern

Assuming the 90 days trading horizon Avision is expected to under-perform the Far Eastern. In addition to that, Avision is 2.63 times more volatile than Far Eastern Department. It trades about -0.14 of its total potential returns per unit of risk. Far Eastern Department is currently generating about -0.21 per unit of volatility. If you would invest  2,865  in Far Eastern Department on August 31, 2024 and sell it today you would lose (345.00) from holding Far Eastern Department or give up 12.04% of portfolio value over 90 days.

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

Avision  vs.  Far Eastern Department

Avision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 Avision and Far Eastern

The main advantage of trading using opposite Avision and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avision 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 Avision 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.