Correlation Between ESUN Financial and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Chunghwa Telecom 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 ESUN Financial and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESUN Financial Holding and Chunghwa Telecom Co, you can compare the effects of market volatilities on ESUN Financial and Chunghwa Telecom 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 ESUN Financial with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Chunghwa Telecom.
Diversification Opportunities for ESUN Financial and Chunghwa Telecom
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESUN and Chunghwa is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and ESUN Financial 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 ESUN Financial Holding are associated (or correlated) with Chunghwa Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Telecom has no effect on the direction of ESUN Financial i.e., ESUN Financial and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between ESUN Financial and Chunghwa Telecom
Assuming the 90 days trading horizon ESUN Financial is expected to generate 1.3 times less return on investment than Chunghwa Telecom. In addition to that, ESUN Financial is 2.0 times more volatile than Chunghwa Telecom Co. It trades about 0.03 of its total potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.08 per unit of volatility. If you would invest 12,200 in Chunghwa Telecom Co on September 2, 2024 and sell it today you would earn a total of 100.00 from holding Chunghwa Telecom Co or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESUN Financial Holding vs. Chunghwa Telecom Co
Performance |
| Timeline |
| ESUN Financial Holding |
| Chunghwa Telecom |
ESUN Financial and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Chunghwa Telecom
The main advantage of trading using opposite ESUN Financial and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial position performs unexpectedly, Chunghwa Telecom 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 Chunghwa Telecom will offset losses from the drop in Chunghwa Telecom's long position.| ESUN Financial vs. Mega Financial Holding | ESUN Financial vs. CTBC Financial Holding | ESUN Financial vs. First Financial Holding | ESUN Financial vs. Fubon Financial Holding |
| Chunghwa Telecom vs. Taiwan Mobile Co | Chunghwa Telecom vs. China Steel Corp | Chunghwa Telecom vs. Formosa Plastics Corp | Chunghwa Telecom 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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