Correlation Between Chunghwa Telecom and ESUN Financial
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and ESUN Financial 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 ESUN Financial 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 ESUN Financial Holding, you can compare the effects of market volatilities on Chunghwa Telecom and ESUN Financial 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 ESUN Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and ESUN Financial.
Diversification Opportunities for Chunghwa Telecom and ESUN Financial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chunghwa and ESUN is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and ESUN Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESUN Financial Holding 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 ESUN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESUN Financial Holding has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and ESUN Financial go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and ESUN Financial
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 2.7 times less return on investment than ESUN Financial. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.68 times less risky than ESUN Financial. It trades about 0.02 of its potential returns per unit of risk. ESUN Financial Holding is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,560 in ESUN Financial Holding on September 4, 2024 and sell it today you would earn a total of 175.00 from holding ESUN Financial Holding or generate 6.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.59% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. ESUN Financial Holding
Performance |
| Timeline |
| Chunghwa Telecom |
| ESUN Financial Holding |
Chunghwa Telecom and ESUN Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and ESUN Financial
The main advantage of trading using opposite Chunghwa Telecom and ESUN Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, ESUN Financial 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 ESUN Financial will offset losses from the drop in ESUN Financial's long position.| Chunghwa Telecom vs. China Steel Corp | Chunghwa Telecom vs. Formosa Plastics Corp | Chunghwa Telecom vs. Cathay Financial Holding | Chunghwa Telecom vs. Fubon Financial Holding |
| ESUN Financial vs. Central Reinsurance Corp | ESUN Financial vs. Huaku Development Co | ESUN Financial vs. Chailease Holding Co | ESUN Financial vs. CTBC Financial Holding |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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