Correlation Between Chunghwa Telecom and Citizens Financial
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Citizens Financial 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 Chunghwa Telecom and Citizens Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chunghwa Telecom Co and Citizens Financial Group, you can compare the effects of market volatilities on Chunghwa Telecom and Citizens Financial 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 Chunghwa Telecom with a short position of Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Citizens Financial.
Diversification Opportunities for Chunghwa Telecom and Citizens Financial
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chunghwa and Citizens is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Citizens Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial and Chunghwa Telecom 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 Chunghwa Telecom Co are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Citizens Financial go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Citizens Financial
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 5.57 times less return on investment than Citizens Financial. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.75 times less risky than Citizens Financial. It trades about 0.04 of its potential returns per unit of risk. Citizens Financial Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,212 in Citizens Financial Group on September 3, 2024 and sell it today you would earn a total of 1,333 from holding Citizens Financial Group or generate 41.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. Citizens Financial Group
Performance |
| Timeline |
| Chunghwa Telecom |
| Citizens Financial |
Chunghwa Telecom and Citizens Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Citizens Financial
The main advantage of trading using opposite Chunghwa Telecom and Citizens Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Citizens Financial 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 Citizens Financial will offset losses from the drop in Citizens Financial's long position.| Chunghwa Telecom vs. INTERSHOP Communications Aktiengesellschaft | Chunghwa Telecom vs. Aozora Bank | Chunghwa Telecom vs. Solstad Offshore ASA | Chunghwa Telecom vs. BANKINTER ADR 2007 |
| Citizens Financial vs. CapitaLand Investment Limited | Citizens Financial vs. Canadian Utilities Limited | Citizens Financial vs. HK Electric Investments | Citizens Financial vs. Algonquin Power Utilities |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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