Correlation Between China Mobile and Taiwan Hon
Can any of the company-specific risk be diversified away by investing in both China Mobile and Taiwan Hon 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 China Mobile and Taiwan Hon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Mobile and Taiwan Hon Chuan, you can compare the effects of market volatilities on China Mobile and Taiwan Hon 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 China Mobile with a short position of Taiwan Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mobile and Taiwan Hon.
Diversification Opportunities for China Mobile and Taiwan Hon
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Taiwan is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile and Taiwan Hon Chuan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Hon Chuan and China Mobile 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 China Mobile are associated (or correlated) with Taiwan Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Hon Chuan has no effect on the direction of China Mobile i.e., China Mobile and Taiwan Hon go up and down completely randomly.
Pair Corralation between China Mobile and Taiwan Hon
Assuming the 90 days trading horizon China Mobile is expected to generate 0.8 times more return on investment than Taiwan Hon. However, China Mobile is 1.25 times less risky than Taiwan Hon. It trades about -0.04 of its potential returns per unit of risk. Taiwan Hon Chuan is currently generating about -0.19 per unit of risk. If you would invest 1,388 in China Mobile on September 13, 2024 and sell it today you would lose (14.00) from holding China Mobile or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Mobile vs. Taiwan Hon Chuan
Performance |
| Timeline |
| China Mobile |
| Taiwan Hon Chuan |
China Mobile and Taiwan Hon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Mobile and Taiwan Hon
The main advantage of trading using opposite China Mobile and Taiwan Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mobile position performs unexpectedly, Taiwan Hon 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 Taiwan Hon will offset losses from the drop in Taiwan Hon's long position.| China Mobile vs. RDC Semiconductor Co | China Mobile vs. Niko Semiconductor Co | China Mobile vs. Grand Pacific Petrochemical | China Mobile vs. Mechema Chemicals Int |
| Taiwan Hon vs. U Media Communications | Taiwan Hon vs. Dimension Computer Technology | Taiwan Hon vs. Simple Mart Retail | Taiwan Hon vs. RiTdisplay Corp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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