Correlation Between MAGIC SOFTWARE and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both MAGIC SOFTWARE 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 MAGIC SOFTWARE and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MAGIC SOFTWARE ENTR and Chunghwa Telecom Co, you can compare the effects of market volatilities on MAGIC SOFTWARE 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 MAGIC SOFTWARE with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAGIC SOFTWARE and Chunghwa Telecom.
Diversification Opportunities for MAGIC SOFTWARE and Chunghwa Telecom
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MAGIC and Chunghwa is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding MAGIC SOFTWARE ENTR and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and MAGIC SOFTWARE 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 MAGIC SOFTWARE ENTR 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 MAGIC SOFTWARE i.e., MAGIC SOFTWARE and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between MAGIC SOFTWARE and Chunghwa Telecom
Assuming the 90 days trading horizon MAGIC SOFTWARE ENTR is expected to generate 3.09 times more return on investment than Chunghwa Telecom. However, MAGIC SOFTWARE is 3.09 times more volatile than Chunghwa Telecom Co. It trades about 0.02 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.02 per unit of risk. If you would invest 1,080 in MAGIC SOFTWARE ENTR on September 1, 2024 and sell it today you would earn a total of 120.00 from holding MAGIC SOFTWARE ENTR or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MAGIC SOFTWARE ENTR vs. Chunghwa Telecom Co
Performance |
| Timeline |
| MAGIC SOFTWARE ENTR |
| Chunghwa Telecom |
MAGIC SOFTWARE and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAGIC SOFTWARE and Chunghwa Telecom
The main advantage of trading using opposite MAGIC SOFTWARE and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAGIC SOFTWARE 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.| MAGIC SOFTWARE vs. SIVERS SEMICONDUCTORS AB | MAGIC SOFTWARE vs. Darden Restaurants | MAGIC SOFTWARE vs. Reliance Steel Aluminum | MAGIC SOFTWARE vs. Q2M Managementberatung AG |
| Chunghwa Telecom vs. ATT Inc | Chunghwa Telecom vs. Deutsche Telekom AG | Chunghwa Telecom vs. Superior Plus Corp | Chunghwa Telecom vs. NMI Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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