Correlation Between Chunghwa Telecom and Hotai
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Hotai 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 Hotai 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 Hotai Motor Co, you can compare the effects of market volatilities on Chunghwa Telecom and Hotai 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 Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Hotai.
Diversification Opportunities for Chunghwa Telecom and Hotai
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chunghwa and Hotai is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai 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 Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Hotai go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Hotai
Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to generate 0.31 times more return on investment than Hotai. However, Chunghwa Telecom Co is 3.22 times less risky than Hotai. It trades about 0.09 of its potential returns per unit of risk. Hotai Motor Co is currently generating about -0.14 per unit of risk. If you would invest 12,250 in Chunghwa Telecom Co on August 28, 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. Hotai Motor Co
Performance |
| Timeline |
| Chunghwa Telecom |
| Hotai Motor |
Chunghwa Telecom and Hotai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Hotai
The main advantage of trading using opposite Chunghwa Telecom and Hotai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Hotai 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 Hotai will offset losses from the drop in Hotai's long position.| Chunghwa Telecom vs. CTBC Financial Holding | Chunghwa Telecom vs. Fubon Financial Holding | Chunghwa Telecom vs. President Chain Store |
| Hotai vs. Taiwan Semiconductor Manufacturing | Hotai vs. Hon Hai Precision | Hotai vs. MediaTek | Hotai 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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