Correlation Between BlueScope Steel and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both BlueScope Steel 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 BlueScope Steel and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BlueScope Steel Limited and Chunghwa Telecom Co, you can compare the effects of market volatilities on BlueScope Steel 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 BlueScope Steel with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueScope Steel and Chunghwa Telecom.
Diversification Opportunities for BlueScope Steel and Chunghwa Telecom
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BlueScope and Chunghwa is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding BlueScope Steel Limited and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and BlueScope Steel 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 BlueScope Steel Limited 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 BlueScope Steel i.e., BlueScope Steel and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between BlueScope Steel and Chunghwa Telecom
Assuming the 90 days horizon BlueScope Steel Limited is expected to generate 2.1 times more return on investment than Chunghwa Telecom. However, BlueScope Steel is 2.1 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 1,029 in BlueScope Steel Limited on September 5, 2024 and sell it today you would earn a total of 331.00 from holding BlueScope Steel Limited or generate 32.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BlueScope Steel Limited vs. Chunghwa Telecom Co
Performance |
| Timeline |
| BlueScope Steel |
| Chunghwa Telecom |
BlueScope Steel and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BlueScope Steel and Chunghwa Telecom
The main advantage of trading using opposite BlueScope Steel and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlueScope Steel 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.| BlueScope Steel vs. SCANDMEDICAL SOLDK 040 | BlueScope Steel vs. Apollo Medical Holdings | BlueScope Steel vs. CVR Medical Corp | BlueScope Steel vs. Microbot Medical |
| Chunghwa Telecom vs. Fast Retailing Co | Chunghwa Telecom vs. QURATE RETAIL INC | Chunghwa Telecom vs. RELIANCE STEEL AL | Chunghwa Telecom vs. BlueScope Steel Limited |
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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