Correlation Between Far Eastern and Yulon

Can any of the company-specific risk be diversified away by investing in both Far Eastern and Yulon 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 Yulon 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 Yulon Motor Co, you can compare the effects of market volatilities on Far Eastern and Yulon 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 Yulon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far Eastern and Yulon.

Diversification Opportunities for Far Eastern and Yulon

0.87

Correlation Coefficient

Far Eastern  Yulon

Very poor diversification

The 3 months correlation between Far and Yulon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern New and Yulon Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yulon Motor 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 Yulon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yulon Motor has no effect on the direction of Far Eastern i.e., Far Eastern and Yulon go up and down completely randomly.

Pair Corralation between Far Eastern and Yulon

Assuming the 90 days trading horizon Far Eastern New is expected to generate 0.86 times more return on investment than Yulon. However, Far Eastern New is 1.16 times less risky than Yulon. It trades about -0.06 of its potential returns per unit of risk. Yulon Motor Co is currently generating about -0.06 per unit of risk. If you would invest  3,755  in Far Eastern New on October 7, 2024 and sell it today you would lose (590.00) from holding Far Eastern New or give up 15.71% of portfolio value over 90 days.

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

Far Eastern New  vs.  Yulon Motor Co

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.

Yulon Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yulon Motor Co 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.

Pair Trading with Far Eastern and Yulon

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

The idea behind Far Eastern New and Yulon Motor Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.