Correlation Between Fast Retailing and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Fast Retailing 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 Fast Retailing and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Chunghwa Telecom Co, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Chunghwa Telecom.
Diversification Opportunities for Fast Retailing and Chunghwa Telecom
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fast and Chunghwa is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Fast Retailing and Chunghwa Telecom
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.21 times more return on investment than Chunghwa Telecom. However, Fast Retailing is 1.21 times more volatile than Chunghwa Telecom Co. It trades about 0.18 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 29,770 in Fast Retailing Co on September 3, 2024 and sell it today you would earn a total of 2,060 from holding Fast Retailing Co or generate 6.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Chunghwa Telecom Co
Performance |
| Timeline |
| Fast Retailing |
| Chunghwa Telecom |
Fast Retailing and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Chunghwa Telecom
The main advantage of trading using opposite Fast Retailing and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
| Chunghwa Telecom vs. INTERSHOP Communications Aktiengesellschaft | Chunghwa Telecom vs. Aozora Bank | Chunghwa Telecom vs. Solstad Offshore ASA | Chunghwa Telecom vs. BANKINTER ADR 2007 |
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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