Correlation Between Far Eastern and TYC Brother

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

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

Diversification Opportunities for Far Eastern and TYC Brother

-0.52

Correlation Coefficient

Far Eastern  TYC Brother

Excellent diversification

The 3 months correlation between Far and TYC is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern New and TYC Brother Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYC Brother Industrial and Far Eastern 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 Eastern New are associated (or correlated) with TYC Brother. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TYC Brother Industrial has no effect on the direction of Far Eastern i.e., Far Eastern and TYC Brother go up and down completely randomly.

Pair Corralation between Far Eastern and TYC Brother

Assuming the 90 days trading horizon Far Eastern New is expected to under-perform the TYC Brother. But the stock apears to be less risky and, when comparing its historical volatility, Far Eastern New is 1.29 times less risky than TYC Brother. The stock trades about -0.06 of its potential returns per unit of risk. The TYC Brother Industrial is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,770  in TYC Brother Industrial on October 7, 2024 and sell it today you would lose (580.00) from holding TYC Brother Industrial or give up 8.57% of portfolio value over 90 days.

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

Far Eastern New  vs.  TYC Brother Industrial

Far Eastern New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Far Eastern New 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

TYC Brother Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Far Eastern and TYC Brother

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

The idea behind Far Eastern New and TYC Brother Industrial 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.