Correlation Between Ford and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Ford and Chunghwa Telecom 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 Ford and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Chunghwa Telecom Co, you can compare the effects of market volatilities on Ford and Chunghwa Telecom 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 Ford with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Chunghwa Telecom.
Diversification Opportunities for Ford and Chunghwa Telecom
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and Chunghwa is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Ford 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 Ford Motor are associated (or correlated) with Chunghwa Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Telecom has no effect on the direction of Ford i.e., Ford and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Ford and Chunghwa Telecom
Taking into account the 90-day investment horizon Ford Motor is expected to generate 4.55 times more return on investment than Chunghwa Telecom. However, Ford is 4.55 times more volatile than Chunghwa Telecom Co. It trades about 0.17 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.13 per unit of risk. If you would invest 1,033 in Ford Motor on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Ford Motor or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Chunghwa Telecom Co
Performance |
| Timeline |
| Ford Motor |
| Chunghwa Telecom |
Ford and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Chunghwa Telecom
The main advantage of trading using opposite Ford and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Chunghwa Telecom 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 Chunghwa Telecom will offset losses from the drop in Chunghwa Telecom's long position.The idea behind Ford Motor and Chunghwa Telecom Co 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.| Chunghwa Telecom vs. Taiwan Mobile Co | Chunghwa Telecom vs. President Chain Store | Chunghwa Telecom vs. Formosa Petrochemical Corp | Chunghwa Telecom vs. Formosa Chemicals Fibre |
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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