Correlation Between CTBC Financial and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both CTBC 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 CTBC 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 CTBC Financial Holding and Chunghwa Telecom Co, you can compare the effects of market volatilities on CTBC 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 CTBC Financial with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Chunghwa Telecom.
Diversification Opportunities for CTBC Financial and Chunghwa Telecom
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CTBC and Chunghwa is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding CTBC 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 CTBC 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 CTBC 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 CTBC Financial i.e., CTBC Financial and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between CTBC Financial and Chunghwa Telecom
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 2.02 times more return on investment than Chunghwa Telecom. However, CTBC Financial is 2.02 times more volatile than Chunghwa Telecom Co. It trades about 0.1 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.03 per unit of risk. If you would invest 2,202 in CTBC Financial Holding on September 4, 2024 and sell it today you would earn a total of 1,658 from holding CTBC Financial Holding or generate 75.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
CTBC Financial Holding vs. Chunghwa Telecom Co
Performance |
| Timeline |
| CTBC Financial Holding |
| Chunghwa Telecom |
CTBC Financial and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Chunghwa Telecom
The main advantage of trading using opposite CTBC Financial and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC 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.| CTBC Financial vs. Central Reinsurance Corp | CTBC Financial vs. Huaku Development Co | CTBC Financial vs. Chailease Holding Co |
| Chunghwa Telecom vs. China Steel Corp | Chunghwa Telecom vs. Formosa Plastics Corp | Chunghwa Telecom vs. Cathay Financial Holding | Chunghwa Telecom vs. Fubon 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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