Correlation Between Chunghwa Telecom and LG Display
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and LG Display 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 LG Display 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 LG Display Co, you can compare the effects of market volatilities on Chunghwa Telecom and LG Display 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 LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and LG Display.
Diversification Opportunities for Chunghwa Telecom and LG Display
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chunghwa and LGA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display 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 LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and LG Display go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and LG Display
Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to generate 1.0 times more return on investment than LG Display. However, Chunghwa Telecom is 1.0 times more volatile than LG Display Co. It trades about -0.07 of its potential returns per unit of risk. LG Display Co is currently generating about -0.47 per unit of risk. If you would invest 3,540 in Chunghwa Telecom Co on January 11, 2025 and sell it today you would lose (160.00) from holding Chunghwa Telecom Co or give up 4.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chunghwa Telecom Co vs. LG Display Co
Performance |
| Timeline |
| Chunghwa Telecom |
| LG Display |
Chunghwa Telecom and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chunghwa Telecom and LG Display
The main advantage of trading using opposite Chunghwa Telecom and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.| Chunghwa Telecom vs. T Mobile | Chunghwa Telecom vs. China Mobile Limited | Chunghwa Telecom vs. Verizon Communications | Chunghwa Telecom vs. ATT Inc |
| LG Display vs. Dalata Hotel Group | LG Display vs. SBI Insurance Group | LG Display vs. MIRAMAR HOTEL INV | LG Display vs. PPHE HOTEL GROUP |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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