Correlation Between EnTie Commercial and Chang Hwa
Can any of the company-specific risk be diversified away by investing in both EnTie Commercial 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 EnTie Commercial and Chang Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EnTie Commercial Bank and Chang Hwa Commercial, you can compare the effects of market volatilities on EnTie Commercial 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 EnTie Commercial with a short position of Chang Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnTie Commercial and Chang Hwa.
Diversification Opportunities for EnTie Commercial and Chang Hwa
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EnTie and Chang is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank 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 EnTie Commercial 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 EnTie Commercial Bank 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 EnTie Commercial i.e., EnTie Commercial and Chang Hwa go up and down completely randomly.
Pair Corralation between EnTie Commercial and Chang Hwa
Assuming the 90 days trading horizon EnTie Commercial Bank is expected to generate 1.74 times more return on investment than Chang Hwa. However, EnTie Commercial is 1.74 times more volatile than Chang Hwa Commercial. It trades about 0.03 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 1,420 in EnTie Commercial Bank on August 29, 2024 and sell it today you would earn a total of 50.00 from holding EnTie Commercial Bank or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EnTie Commercial Bank vs. Chang Hwa Commercial
Performance |
| Timeline |
| EnTie Commercial Bank |
| Chang Hwa Commercial |
EnTie Commercial and Chang Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EnTie Commercial and Chang Hwa
The main advantage of trading using opposite EnTie Commercial and Chang Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnTie Commercial 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.| EnTie Commercial vs. Taiwan Secom Co | EnTie Commercial vs. TTET Union Corp | EnTie Commercial vs. China Steel Chemical | EnTie Commercial vs. Taiwan Shin Kong |
| Chang Hwa vs. Taiwan Secom Co | Chang Hwa vs. TTET Union Corp | Chang Hwa vs. China Steel Chemical | Chang Hwa 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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