Correlation Between Far EasTone and Transcend Information

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

By analyzing existing cross correlation between Far EasTone Telecommunications and Transcend Information, you can compare the effects of market volatilities on Far EasTone and Transcend Information 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 EasTone with a short position of Transcend Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and Transcend Information.

Diversification Opportunities for Far EasTone and Transcend Information

-0.55

Correlation Coefficient

Far EasTone  Transcend Information

Excellent diversification

The 3 months correlation between Far and Transcend is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and Transcend Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcend Information and Far EasTone 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 EasTone Telecommunications are associated (or correlated) with Transcend Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcend Information has no effect on the direction of Far EasTone i.e., Far EasTone and Transcend Information go up and down completely randomly.

Pair Corralation between Far EasTone and Transcend Information

Assuming the 90 days trading horizon Far EasTone is expected to generate 1.11 times less return on investment than Transcend Information. But when comparing it to its historical volatility, Far EasTone Telecommunications is 1.39 times less risky than Transcend Information. It trades about 0.05 of its potential returns per unit of risk. Transcend Information is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,800  in Transcend Information on October 11, 2024 and sell it today you would earn a total of  1,950  from holding Transcend Information or generate 28.68% return on investment over 90 days.

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

Far EasTone Telecommunications  vs.  Transcend Information

Far EasTone Telecomm

Risk-Adjusted Performance

0 of 100

Very Weak

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

Transcend Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transcend Information 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 EasTone and Transcend Information

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

The idea behind Far EasTone Telecommunications and Transcend Information 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..