Correlation Between Kuo Yang and Far Eastern

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

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

Diversification Opportunities for Kuo Yang and Far Eastern

-0.19

Correlation Coefficient

Kuo Yang  Far Eastern

Good diversification

The 3 months correlation between Kuo and Far is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kuo Yang Construction and Far Eastern New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern New and Kuo Yang 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 Kuo Yang Construction 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 New has no effect on the direction of Kuo Yang i.e., Kuo Yang and Far Eastern go up and down completely randomly.

Pair Corralation between Kuo Yang and Far Eastern

Assuming the 90 days trading horizon Kuo Yang Construction is expected to under-perform the Far Eastern. But the stock apears to be less risky and, when comparing its historical volatility, Kuo Yang Construction is 1.0 times less risky than Far Eastern. The stock trades about -0.2 of its potential returns per unit of risk. The Far Eastern New is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  3,320  in Far Eastern New on October 20, 2024 and sell it today you would lose (205.00) from holding Far Eastern New or give up 6.17% of portfolio value over 90 days.

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

Kuo Yang Construction  vs.  Far Eastern New

Kuo Yang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuo Yang Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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.

Pair Trading with Kuo Yang and Far Eastern

The main advantage of trading using opposite Kuo Yang and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuo Yang 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 Kuo Yang Construction and Far Eastern New 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.