Correlation Between Chang Hwa and Bank of Kaohsiung
Can any of the company-specific risk be diversified away by investing in both Chang Hwa and Bank of Kaohsiung 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 Bank of Kaohsiung 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 Bank of Kaohsiung, you can compare the effects of market volatilities on Chang Hwa and Bank of Kaohsiung 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 Bank of Kaohsiung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chang Hwa and Bank of Kaohsiung.
Diversification Opportunities for Chang Hwa and Bank of Kaohsiung
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chang and Bank is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chang Hwa Commercial and Bank of Kaohsiung in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Kaohsiung 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 Bank of Kaohsiung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Kaohsiung has no effect on the direction of Chang Hwa i.e., Chang Hwa and Bank of Kaohsiung go up and down completely randomly.
Pair Corralation between Chang Hwa and Bank of Kaohsiung
Assuming the 90 days trading horizon Chang Hwa Commercial is expected to under-perform the Bank of Kaohsiung. But the stock apears to be less risky and, when comparing its historical volatility, Chang Hwa Commercial is 1.15 times less risky than Bank of Kaohsiung. The stock trades about -0.02 of its potential returns per unit of risk. The Bank of Kaohsiung is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,155 in Bank of Kaohsiung on August 29, 2024 and sell it today you would earn a total of 15.00 from holding Bank of Kaohsiung or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chang Hwa Commercial vs. Bank of Kaohsiung
Performance |
| Timeline |
| Chang Hwa Commercial |
| Bank of Kaohsiung |
Chang Hwa and Bank of Kaohsiung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chang Hwa and Bank of Kaohsiung
The main advantage of trading using opposite Chang Hwa and Bank of Kaohsiung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chang Hwa position performs unexpectedly, Bank of Kaohsiung 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 Bank of Kaohsiung will offset losses from the drop in Bank of Kaohsiung'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 |
| Bank of Kaohsiung vs. Taiwan Secom Co | Bank of Kaohsiung vs. TTET Union Corp | Bank of Kaohsiung vs. China Steel Chemical | Bank of Kaohsiung vs. Taiwan Shin Kong |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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