Correlation Between Far Eastern and King Chou

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

Diversification Opportunities for Far Eastern and King Chou

-0.31

Correlation Coefficient

Far Eastern  King Chou

Very good diversification

The 3 months correlation between Far and King is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Far Eastern New and King Chou Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Chou Marine 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 King Chou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Chou Marine has no effect on the direction of Far Eastern i.e., Far Eastern and King Chou go up and down completely randomly.

Pair Corralation between Far Eastern and King Chou

Assuming the 90 days trading horizon Far Eastern New is expected to under-perform the King Chou. In addition to that, Far Eastern is 2.19 times more volatile than King Chou Marine. It trades about -0.21 of its total potential returns per unit of risk. King Chou Marine is currently generating about 0.24 per unit of volatility. If you would invest  3,945  in King Chou Marine on September 19, 2024 and sell it today you would earn a total of  205.00  from holding King Chou Marine or generate 5.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Far Eastern New  vs.  King Chou Marine

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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

King Chou Marine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in King Chou Marine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, King Chou 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 King Chou

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

The idea behind Far Eastern New and King Chou Marine 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.