Correlation Between Lemtech Holdings and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Lemtech Holdings 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 Lemtech Holdings and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lemtech Holdings Co and Chunghwa Telecom Co, you can compare the effects of market volatilities on Lemtech Holdings 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 Lemtech Holdings with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lemtech Holdings and Chunghwa Telecom.
Diversification Opportunities for Lemtech Holdings and Chunghwa Telecom
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lemtech and Chunghwa is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lemtech Holdings Co and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Lemtech Holdings 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 Lemtech Holdings Co 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 Lemtech Holdings i.e., Lemtech Holdings and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Lemtech Holdings and Chunghwa Telecom
Assuming the 90 days trading horizon Lemtech Holdings Co is expected to generate 6.56 times more return on investment than Chunghwa Telecom. However, Lemtech Holdings is 6.56 times more volatile than Chunghwa Telecom Co. It trades about 0.24 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.12 per unit of risk. If you would invest 10,950 in Lemtech Holdings Co on September 12, 2024 and sell it today you would earn a total of 1,800 from holding Lemtech Holdings Co or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lemtech Holdings Co vs. Chunghwa Telecom Co
Performance |
| Timeline |
| Lemtech Holdings |
| Chunghwa Telecom |
Lemtech Holdings and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lemtech Holdings and Chunghwa Telecom
The main advantage of trading using opposite Lemtech Holdings and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lemtech Holdings 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.| Lemtech Holdings vs. Catcher Technology Co | Lemtech Holdings vs. Solar Applied Materials | Lemtech Holdings vs. Evergreen Steel Corp | Lemtech Holdings vs. Shin Zu Shing |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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