Correlation Between Far EasTone and FineMat Applied

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

Diversification Opportunities for Far EasTone and FineMat Applied

-0.3

Correlation Coefficient

Far EasTone  FineMat Applied

Very good diversification

The 3 months correlation between Far and FineMat is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications and FineMat Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FineMat Applied Materials 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 FineMat Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FineMat Applied Materials has no effect on the direction of Far EasTone i.e., Far EasTone and FineMat Applied go up and down completely randomly.

Pair Corralation between Far EasTone and FineMat Applied

Assuming the 90 days trading horizon Far EasTone Telecommunications is expected to generate 0.58 times more return on investment than FineMat Applied. However, Far EasTone Telecommunications is 1.73 times less risky than FineMat Applied. It trades about 0.04 of its potential returns per unit of risk. FineMat Applied Materials is currently generating about -0.06 per unit of risk. If you would invest  9,140  in Far EasTone Telecommunications on December 22, 2024 and sell it today you would earn a total of  180.00  from holding Far EasTone Telecommunications or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Far EasTone Telecommunications  vs.  FineMat Applied Materials

Far EasTone Telecomm

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Far EasTone Telecommunications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Far EasTone is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

FineMat Applied Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days FineMat Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FineMat Applied 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 EasTone and FineMat Applied

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

The idea behind Far EasTone Telecommunications and FineMat Applied Materials 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.