Correlation Between Corporate Travel and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Corporate Travel 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 Corporate Travel and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corporate Travel Management and Chunghwa Telecom Co, you can compare the effects of market volatilities on Corporate Travel 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 Corporate Travel with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Travel and Chunghwa Telecom.
Diversification Opportunities for Corporate Travel and Chunghwa Telecom
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Corporate and Chunghwa is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Travel Management and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Corporate Travel 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 Corporate Travel Management 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 Corporate Travel i.e., Corporate Travel and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Corporate Travel and Chunghwa Telecom
Assuming the 90 days trading horizon Corporate Travel Management is expected to generate 2.03 times more return on investment than Chunghwa Telecom. However, Corporate Travel is 2.03 times more volatile than Chunghwa Telecom Co. It trades about 0.31 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.12 per unit of risk. If you would invest 700.00 in Corporate Travel Management on August 28, 2024 and sell it today you would earn a total of 145.00 from holding Corporate Travel Management or generate 20.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Corporate Travel Management vs. Chunghwa Telecom Co
Performance |
| Timeline |
| Corporate Travel Man |
| Chunghwa Telecom |
Corporate Travel and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Corporate Travel and Chunghwa Telecom
The main advantage of trading using opposite Corporate Travel and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Travel 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.| Corporate Travel vs. Penta Ocean Construction Co | Corporate Travel vs. Daito Trust Construction | Corporate Travel vs. Sterling Construction | Corporate Travel vs. WIMFARM SA EO |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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