Correlation Between Chunghwa Telecom and Taiwan Speciality
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Taiwan Speciality 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 Taiwan Speciality 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 Taiwan Speciality Chemicals, you can compare the effects of market volatilities on Chunghwa Telecom and Taiwan Speciality 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 Taiwan Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Taiwan Speciality.
Diversification Opportunities for Chunghwa Telecom and Taiwan Speciality
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chunghwa and Taiwan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Taiwan Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Speciality 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 Taiwan Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Speciality has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Taiwan Speciality go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Taiwan Speciality
Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to generate 0.33 times more return on investment than Taiwan Speciality. However, Chunghwa Telecom Co is 3.08 times less risky than Taiwan Speciality. It trades about 0.08 of its potential returns per unit of risk. Taiwan Speciality Chemicals is currently generating about -0.14 per unit of risk. If you would invest 12,250 in Chunghwa Telecom Co on August 30, 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. Taiwan Speciality Chemicals
Performance |
| Timeline |
| Chunghwa Telecom |
| Taiwan Speciality |
Chunghwa Telecom and Taiwan Speciality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Taiwan Speciality
The main advantage of trading using opposite Chunghwa Telecom and Taiwan Speciality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Taiwan Speciality 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 Taiwan Speciality will offset losses from the drop in Taiwan Speciality'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 |
| Taiwan Speciality vs. Taiwan Semiconductor Manufacturing | Taiwan Speciality vs. Hon Hai Precision | Taiwan Speciality vs. MediaTek | Taiwan Speciality 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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