Correlation Between Fubon MSCI and Chunghwa Telecom

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Can any of the company-specific risk be diversified away by investing in both Fubon MSCI and Chunghwa Telecom 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 Fubon MSCI and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon MSCI Taiwan and Chunghwa Telecom Co, you can compare the effects of market volatilities on Fubon MSCI and Chunghwa Telecom 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 Fubon MSCI with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon MSCI and Chunghwa Telecom.

Diversification Opportunities for Fubon MSCI and Chunghwa Telecom

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Fubon and Chunghwa is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fubon MSCI Taiwan and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Fubon MSCI 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 Fubon MSCI Taiwan are associated (or correlated) with Chunghwa Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Telecom has no effect on the direction of Fubon MSCI i.e., Fubon MSCI and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between Fubon MSCI and Chunghwa Telecom

Assuming the 90 days trading horizon Fubon MSCI Taiwan is expected to under-perform the Chunghwa Telecom. In addition to that, Fubon MSCI is 2.69 times more volatile than Chunghwa Telecom Co. It trades about -0.06 of its total potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.09 per unit of volatility. If you would invest  12,250  in Chunghwa Telecom Co on August 27, 2024 and sell it today you would earn a total of  100.00  from holding Chunghwa Telecom Co or generate 0.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Fubon MSCI Taiwan  vs.  Chunghwa Telecom Co

 Performance 
       Timeline  
Fubon MSCI Taiwan 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Fubon MSCI Taiwan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Fubon MSCI may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Chunghwa Telecom 

Risk-Adjusted Performance

0 of 100

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

Fubon MSCI and Chunghwa Telecom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fubon MSCI and Chunghwa Telecom

The main advantage of trading using opposite Fubon MSCI and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon MSCI position performs unexpectedly, Chunghwa Telecom 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 Chunghwa Telecom will offset losses from the drop in Chunghwa Telecom's long position.
The idea behind Fubon MSCI Taiwan and Chunghwa Telecom Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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