Correlation Between Aozora Bank and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Aozora Bank 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 Aozora Bank and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aozora Bank and Chunghwa Telecom Co, you can compare the effects of market volatilities on Aozora Bank 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 Aozora Bank with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aozora Bank and Chunghwa Telecom.
Diversification Opportunities for Aozora Bank and Chunghwa Telecom
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aozora and Chunghwa is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Aozora Bank 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 Aozora Bank 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 Aozora Bank i.e., Aozora Bank and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Aozora Bank and Chunghwa Telecom
Assuming the 90 days horizon Aozora Bank is expected to generate 2.0 times more return on investment than Chunghwa Telecom. However, Aozora Bank is 2.0 times more volatile than Chunghwa Telecom Co. It trades about 0.04 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.04 per unit of risk. If you would invest 1,380 in Aozora Bank on September 3, 2024 and sell it today you would earn a total of 110.00 from holding Aozora Bank or generate 7.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aozora Bank vs. Chunghwa Telecom Co
Performance |
| Timeline |
| Aozora Bank |
| Chunghwa Telecom |
Aozora Bank and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aozora Bank and Chunghwa Telecom
The main advantage of trading using opposite Aozora Bank and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aozora Bank 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.The idea behind Aozora Bank and Chunghwa Telecom Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Chunghwa Telecom vs. INTERSHOP Communications Aktiengesellschaft | Chunghwa Telecom vs. Aozora Bank | Chunghwa Telecom vs. Solstad Offshore ASA | Chunghwa Telecom vs. BANKINTER ADR 2007 |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |