Correlation Between Chang Hwa and TECO Electric
Can any of the company-specific risk be diversified away by investing in both Chang Hwa and TECO Electric 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 Chang Hwa and TECO Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chang Hwa Commercial and TECO Electric Machinery, you can compare the effects of market volatilities on Chang Hwa and TECO Electric 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 Chang Hwa with a short position of TECO Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Hwa and TECO Electric.
Diversification Opportunities for Chang Hwa and TECO Electric
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chang and TECO is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chang Hwa Commercial and TECO Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECO Electric Machinery and Chang Hwa 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 Chang Hwa Commercial are associated (or correlated) with TECO Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECO Electric Machinery has no effect on the direction of Chang Hwa i.e., Chang Hwa and TECO Electric go up and down completely randomly.
Pair Corralation between Chang Hwa and TECO Electric
Assuming the 90 days trading horizon Chang Hwa Commercial is expected to generate 0.35 times more return on investment than TECO Electric. However, Chang Hwa Commercial is 2.83 times less risky than TECO Electric. It trades about 0.05 of its potential returns per unit of risk. TECO Electric Machinery is currently generating about 0.01 per unit of risk. If you would invest 1,765 in Chang Hwa Commercial on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Chang Hwa Commercial or generate 0.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chang Hwa Commercial vs. TECO Electric Machinery
Performance |
| Timeline |
| Chang Hwa Commercial |
| TECO Electric Machinery |
Chang Hwa and TECO Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chang Hwa and TECO Electric
The main advantage of trading using opposite Chang Hwa and TECO Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chang Hwa position performs unexpectedly, TECO Electric 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 TECO Electric will offset losses from the drop in TECO Electric's long position.| Chang Hwa vs. Taiwan Secom Co | Chang Hwa vs. TTET Union Corp | Chang Hwa vs. China Steel Chemical | Chang Hwa vs. Taiwan Shin Kong |
| TECO Electric vs. Yulon Motor Co | TECO Electric vs. Far Eastern Department | TECO Electric vs. China Steel Corp | TECO Electric vs. Chang Hwa Commercial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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