Correlation Between Chunghwa Telecom and Far EasTone
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Far EasTone 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 Far EasTone 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 Far EasTone Telecommunications, you can compare the effects of market volatilities on Chunghwa Telecom and Far EasTone 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 Far EasTone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Far EasTone.
Diversification Opportunities for Chunghwa Telecom and Far EasTone
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chunghwa and Far is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Far EasTone Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far EasTone Telecomm 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 Far EasTone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far EasTone Telecomm has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Far EasTone go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Far EasTone
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 3.93 times less return on investment than Far EasTone. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.63 times less risky than Far EasTone. It trades about 0.03 of its potential returns per unit of risk. Far EasTone Telecommunications is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 7,030 in Far EasTone Telecommunications on August 26, 2024 and sell it today you would earn a total of 1,890 from holding Far EasTone Telecommunications or generate 26.88% 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. Far EasTone Telecommunications
Performance |
| Timeline |
| Chunghwa Telecom |
| Far EasTone Telecomm |
Chunghwa Telecom and Far EasTone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Far EasTone
The main advantage of trading using opposite Chunghwa Telecom and Far EasTone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Far EasTone 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 Far EasTone will offset losses from the drop in Far EasTone's long position.| Chunghwa Telecom vs. CTBC Financial Holding | Chunghwa Telecom vs. Fubon Financial Holding | Chunghwa Telecom vs. President Chain Store |
| Far EasTone vs. Chunghwa Telecom Co | Far EasTone vs. CTBC Financial Holding | Far EasTone vs. Fubon Financial Holding | Far EasTone vs. President Chain Store |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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