Correlation Between Chunghwa Telecom and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Gamma Communications 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 Gamma Communications 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 Gamma Communications plc, you can compare the effects of market volatilities on Chunghwa Telecom and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Gamma Communications.
Diversification Opportunities for Chunghwa Telecom and Gamma Communications
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Chunghwa and Gamma is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Gamma Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications plc 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications plc has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Gamma Communications go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Gamma Communications
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 5.99 times less return on investment than Gamma Communications. But when comparing it to its historical volatility, Chunghwa Telecom Co is 2.59 times less risky than Gamma Communications. It trades about 0.04 of its potential returns per unit of risk. Gamma Communications plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,188 in Gamma Communications plc on August 29, 2024 and sell it today you would earn a total of 672.00 from holding Gamma Communications plc or generate 56.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. Gamma Communications plc
Performance |
| Timeline |
| Chunghwa Telecom |
| Gamma Communications plc |
Chunghwa Telecom and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Gamma Communications
The main advantage of trading using opposite Chunghwa Telecom and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.The idea behind Chunghwa Telecom Co and Gamma Communications plc 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.| Gamma Communications vs. QINGCI GAMES INC | Gamma Communications vs. TROPHY GAMES DEV | Gamma Communications vs. GigaMedia | Gamma Communications vs. Perseus Mining 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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