Correlation Between Chang Hwa and Taichung Commercial
Can any of the company-specific risk be diversified away by investing in both Chang Hwa and Taichung 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 Chang Hwa and Taichung Commercial 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 Taichung Commercial Bank, you can compare the effects of market volatilities on Chang Hwa and Taichung 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 Chang Hwa with a short position of Taichung Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Hwa and Taichung Commercial.
Diversification Opportunities for Chang Hwa and Taichung Commercial
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Chang and Taichung is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chang Hwa Commercial and Taichung Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taichung Commercial Bank 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 Taichung Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taichung Commercial Bank has no effect on the direction of Chang Hwa i.e., Chang Hwa and Taichung Commercial go up and down completely randomly.
Pair Corralation between Chang Hwa and Taichung Commercial
Assuming the 90 days trading horizon Chang Hwa is expected to generate 1.94 times less return on investment than Taichung Commercial. But when comparing it to its historical volatility, Chang Hwa Commercial is 1.23 times less risky than Taichung Commercial. It trades about 0.03 of its potential returns per unit of risk. Taichung Commercial Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,795 in Taichung Commercial Bank on August 24, 2024 and sell it today you would earn a total of 10.00 from holding Taichung Commercial Bank or generate 0.56% 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. Taichung Commercial Bank
Performance |
| Timeline |
| Chang Hwa Commercial |
| Taichung Commercial Bank |
Chang Hwa and Taichung Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chang Hwa and Taichung Commercial
The main advantage of trading using opposite Chang Hwa and Taichung Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chang Hwa position performs unexpectedly, Taichung 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 Taichung Commercial will offset losses from the drop in Taichung Commercial's long position.| Chang Hwa vs. Hua Nan Financial | Chang Hwa vs. First Financial Holding | Chang Hwa vs. Sinopac Financial Holdings | Chang Hwa vs. Taishin Financial Holding |
| Taichung Commercial vs. Fubon Financial Holding | Taichung Commercial vs. CTBC Financial Holding | Taichung Commercial vs. Mega Financial Holding | Taichung Commercial vs. Cathay 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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