Correlation Between Yulon and Far Eastern

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

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

Diversification Opportunities for Yulon and Far Eastern

-0.44

Correlation Coefficient

Yulon  Far Eastern

Very good diversification

The 3 months correlation between Yulon and Far is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Yulon Motor Co 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 Yulon 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 Yulon Motor Co 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 Yulon i.e., Yulon and Far Eastern go up and down completely randomly.

Pair Corralation between Yulon and Far Eastern

Assuming the 90 days trading horizon Yulon Motor Co is expected to under-perform the Far Eastern. In addition to that, Yulon is 1.25 times more volatile than Far Eastern Department. It trades about -0.13 of its total potential returns per unit of risk. Far Eastern Department is currently generating about 0.09 per unit of volatility. If you would invest  2,270  in Far Eastern Department on December 30, 2024 and sell it today you would earn a total of  180.00  from holding Far Eastern Department or generate 7.93% return on investment over 90 days.

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

Yulon Motor Co  vs.  Far Eastern Department

Yulon Motor

Risk-Adjusted Performance

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

Far Eastern Department

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Far Eastern Department are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Far Eastern may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Yulon and Far Eastern

The main advantage of trading using opposite Yulon and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yulon 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 Yulon Motor Co 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.