Correlation Between Union Bank and Chang Hwa
Can any of the company-specific risk be diversified away by investing in both Union Bank and Chang Hwa 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 Union Bank and Chang Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Bank of and Chang Hwa Commercial, you can compare the effects of market volatilities on Union Bank and Chang Hwa 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 Union Bank with a short position of Chang Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Bank and Chang Hwa.
Diversification Opportunities for Union Bank and Chang Hwa
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Union and Chang is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of and Chang Hwa Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chang Hwa Commercial and Union Bank 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 Union Bank of are associated (or correlated) with Chang Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chang Hwa Commercial has no effect on the direction of Union Bank i.e., Union Bank and Chang Hwa go up and down completely randomly.
Pair Corralation between Union Bank and Chang Hwa
Assuming the 90 days trading horizon Union Bank of is expected to generate 1.44 times more return on investment than Chang Hwa. However, Union Bank is 1.44 times more volatile than Chang Hwa Commercial. It trades about 0.04 of its potential returns per unit of risk. Chang Hwa Commercial is currently generating about 0.02 per unit of risk. If you would invest 1,400 in Union Bank of on November 4, 2024 and sell it today you would earn a total of 145.00 from holding Union Bank of or generate 10.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Bank of vs. Chang Hwa Commercial
Performance |
| Timeline |
| Union Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chang Hwa Commercial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Union Bank and Chang Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Bank and Chang Hwa
The main advantage of trading using opposite Union Bank and Chang Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bank position performs unexpectedly, Chang Hwa 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 Chang Hwa will offset losses from the drop in Chang Hwa's long position.The idea behind Union Bank of and Chang Hwa Commercial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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