Correlation Between Great Taipei and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Great Taipei 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 Great Taipei and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Taipei Gas and Chunghwa Telecom Co, you can compare the effects of market volatilities on Great Taipei 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 Great Taipei with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Taipei and Chunghwa Telecom.
Diversification Opportunities for Great Taipei and Chunghwa Telecom
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Great and Chunghwa is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Great Taipei Gas and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Great Taipei 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 Great Taipei Gas 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 Great Taipei i.e., Great Taipei and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Great Taipei and Chunghwa Telecom
Assuming the 90 days trading horizon Great Taipei Gas is expected to under-perform the Chunghwa Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Great Taipei Gas is 1.79 times less risky than Chunghwa Telecom. The stock trades about -0.1 of its potential returns per unit of risk. The Chunghwa Telecom Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 12,650 in Chunghwa Telecom Co on September 3, 2024 and sell it today you would lose (350.00) from holding Chunghwa Telecom Co or give up 2.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Taipei Gas vs. Chunghwa Telecom Co
Performance |
| Timeline |
| Great Taipei Gas |
| Chunghwa Telecom |
Great Taipei and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Taipei and Chunghwa Telecom
The main advantage of trading using opposite Great Taipei and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Taipei 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.| Great Taipei vs. Taiwan Secom Co | Great Taipei vs. Taiwan Shin Kong | Great Taipei vs. Taiwan Cogeneration Corp | Great Taipei vs. Shin Shin Natural |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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