Correlation Between Chunghwa Telecom and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Electronic Arts 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 Electronic Arts 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 Electronic Arts, you can compare the effects of market volatilities on Chunghwa Telecom and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Electronic Arts.
Diversification Opportunities for Chunghwa Telecom and Electronic Arts
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chunghwa and Electronic is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Electronic Arts go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Electronic Arts
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 4.45 times less return on investment than Electronic Arts. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.09 times less risky than Electronic Arts. It trades about 0.04 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 12,595 in Electronic Arts on September 3, 2024 and sell it today you would earn a total of 2,919 from holding Electronic Arts or generate 23.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. Electronic Arts
Performance |
| Timeline |
| Chunghwa Telecom |
| Electronic Arts |
Chunghwa Telecom and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and Electronic Arts
The main advantage of trading using opposite Chunghwa Telecom and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' 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 |
| Electronic Arts vs. TOTAL GABON | Electronic Arts vs. Walgreens Boots Alliance | Electronic Arts vs. Peak Resources 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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