Correlation Between Chunghwa Telecom and ESSILORLUXOTTICA
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and ESSILORLUXOTTICA 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 ESSILORLUXOTTICA 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 ESSILORLUXOTTICA 12ON, you can compare the effects of market volatilities on Chunghwa Telecom and ESSILORLUXOTTICA 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 ESSILORLUXOTTICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and ESSILORLUXOTTICA.
Diversification Opportunities for Chunghwa Telecom and ESSILORLUXOTTICA
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chunghwa and ESSILORLUXOTTICA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and ESSILORLUXOTTICA 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSILORLUXOTTICA 12ON 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 ESSILORLUXOTTICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSILORLUXOTTICA 12ON has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and ESSILORLUXOTTICA go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and ESSILORLUXOTTICA
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 5.43 times less return on investment than ESSILORLUXOTTICA. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.54 times less risky than ESSILORLUXOTTICA. It trades about 0.03 of its potential returns per unit of risk. ESSILORLUXOTTICA 12ON is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9,152 in ESSILORLUXOTTICA 12ON on November 8, 2024 and sell it today you would earn a total of 4,248 from holding ESSILORLUXOTTICA 12ON or generate 46.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. ESSILORLUXOTTICA 12ON
Performance |
| Timeline |
| Chunghwa Telecom |
| ESSILORLUXOTTICA 12ON |
Chunghwa Telecom and ESSILORLUXOTTICA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and ESSILORLUXOTTICA
The main advantage of trading using opposite Chunghwa Telecom and ESSILORLUXOTTICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, ESSILORLUXOTTICA 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 ESSILORLUXOTTICA will offset losses from the drop in ESSILORLUXOTTICA's long position.| Chunghwa Telecom vs. EMBARK EDUCATION LTD | Chunghwa Telecom vs. HEALTHSTREAM | Chunghwa Telecom vs. Mitsui Chemicals | Chunghwa Telecom vs. IDP EDUCATION LTD |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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