Correlation Between Chunghwa Telecom and EnTie Commercial
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and EnTie Commercial 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 EnTie Commercial 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 EnTie Commercial Bank, you can compare the effects of market volatilities on Chunghwa Telecom and EnTie Commercial 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 EnTie Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and EnTie Commercial.
Diversification Opportunities for Chunghwa Telecom and EnTie Commercial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chunghwa and EnTie is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and EnTie Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnTie Commercial Bank 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 EnTie Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnTie Commercial Bank has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and EnTie Commercial go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and EnTie Commercial
Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to generate 0.32 times more return on investment than EnTie Commercial. However, Chunghwa Telecom Co is 3.1 times less risky than EnTie Commercial. It trades about 0.05 of its potential returns per unit of risk. EnTie Commercial Bank is currently generating about -0.13 per unit of risk. If you would invest 12,200 in Chunghwa Telecom Co on September 23, 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. EnTie Commercial Bank
Performance |
| Timeline |
| Chunghwa Telecom |
| EnTie Commercial Bank |
Chunghwa Telecom and EnTie Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and EnTie Commercial
The main advantage of trading using opposite Chunghwa Telecom and EnTie Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, EnTie Commercial 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 EnTie Commercial will offset losses from the drop in EnTie Commercial'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 |
| EnTie Commercial vs. Taiwan Semiconductor Manufacturing | EnTie Commercial vs. Hon Hai Precision | EnTie Commercial vs. MediaTek | EnTie Commercial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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