Correlation Between Far EasTone and Dynapack International

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

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

Diversification Opportunities for Far EasTone and Dynapack International

-0.19

Correlation Coefficient

Far EasTone  Dynapack International

Good diversification

The 3 months correlation between Far and Dynapack is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and Dynapack International Technol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynapack International and Far EasTone 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 Far EasTone Telecommunications are associated (or correlated) with Dynapack International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynapack International has no effect on the direction of Far EasTone i.e., Far EasTone and Dynapack International go up and down completely randomly.

Pair Corralation between Far EasTone and Dynapack International

Assuming the 90 days trading horizon Far EasTone is expected to generate 55.79 times less return on investment than Dynapack International. But when comparing it to its historical volatility, Far EasTone Telecommunications is 4.14 times less risky than Dynapack International. It trades about 0.05 of its potential returns per unit of risk. Dynapack International Technology is currently generating about 0.61 of returns per unit of risk over similar time horizon. If you would invest  10,800  in Dynapack International Technology on September 1, 2024 and sell it today you would earn a total of  9,000  from holding Dynapack International Technology or generate 83.33% return on investment over 90 days.

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

Far EasTone Telecommunications  vs.  Dynapack International Technol

Far EasTone Telecomm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Far EasTone Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Far EasTone is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Dynapack International

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dynapack International Technology are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dynapack International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Far EasTone and Dynapack International

The main advantage of trading using opposite Far EasTone and Dynapack International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone position performs unexpectedly, Dynapack International 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 Dynapack International will offset losses from the drop in Dynapack International's long position.

The idea behind Far EasTone Telecommunications and Dynapack International Technology 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.