Correlation Between Chunghwa Telecom and Johnson Health
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Johnson Health 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 Chunghwa Telecom and Johnson Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chunghwa Telecom Co and Johnson Health Tech, you can compare the effects of market volatilities on Chunghwa Telecom and Johnson Health 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 Chunghwa Telecom with a short position of Johnson Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Johnson Health.
Diversification Opportunities for Chunghwa Telecom and Johnson Health
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chunghwa and Johnson is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Johnson Health Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Health Tech and Chunghwa Telecom 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 Chunghwa Telecom Co are associated (or correlated) with Johnson Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Health Tech has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Johnson Health go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Johnson Health
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 6.64 times less return on investment than Johnson Health. But when comparing it to its historical volatility, Chunghwa Telecom Co is 9.78 times less risky than Johnson Health. It trades about 0.13 of its potential returns per unit of risk. Johnson Health Tech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 14,800 in Johnson Health Tech on August 29, 2024 and sell it today you would earn a total of 950.00 from holding Johnson Health Tech or generate 6.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. Johnson Health Tech
Performance |
| Timeline |
| Chunghwa Telecom |
| Johnson Health Tech |
Chunghwa Telecom and Johnson Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Johnson Health
The main advantage of trading using opposite Chunghwa Telecom and Johnson Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Johnson Health 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 Johnson Health will offset losses from the drop in Johnson Health's long position.| Chunghwa Telecom vs. Taiwan Mobile Co | Chunghwa Telecom vs. China Steel Corp | Chunghwa Telecom vs. Formosa Plastics Corp | Chunghwa Telecom vs. Cathay Financial Holding |
| Johnson Health vs. Yulon Finance Corp | Johnson Health vs. Taiwan Secom Co | Johnson Health vs. Pou Chen Corp | Johnson Health vs. Great Wall Enterprise |
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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