Correlation Between Chunghwa Telecom and Sanyang
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Sanyang 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 Sanyang 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 Sanyang Motor Co, you can compare the effects of market volatilities on Chunghwa Telecom and Sanyang 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 Sanyang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Sanyang.
Diversification Opportunities for Chunghwa Telecom and Sanyang
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chunghwa and Sanyang is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Sanyang Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyang Motor 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 Sanyang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyang Motor has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Sanyang go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Sanyang
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 8.28 times less return on investment than Sanyang. But when comparing it to its historical volatility, Chunghwa Telecom Co is 2.86 times less risky than Sanyang. It trades about 0.05 of its potential returns per unit of risk. Sanyang Motor Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,000 in Sanyang Motor Co on August 27, 2024 and sell it today you would earn a total of 240.00 from holding Sanyang Motor Co or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. Sanyang Motor Co
Performance |
| Timeline |
| Chunghwa Telecom |
| Sanyang Motor |
Chunghwa Telecom and Sanyang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Sanyang
The main advantage of trading using opposite Chunghwa Telecom and Sanyang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Sanyang 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 Sanyang will offset losses from the drop in Sanyang's long position.| Chunghwa Telecom vs. CTBC Financial Holding | Chunghwa Telecom vs. Fubon Financial Holding | Chunghwa Telecom vs. President Chain Store |
| Sanyang vs. Taiwan Semiconductor Manufacturing | Sanyang vs. Hon Hai Precision | Sanyang vs. MediaTek | Sanyang vs. Chunghwa Telecom Co |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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