Correlation Between Nintendo and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Nintendo 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 Nintendo and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nintendo Co and Chunghwa Telecom Co, you can compare the effects of market volatilities on Nintendo 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 Nintendo with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nintendo and Chunghwa Telecom.
Diversification Opportunities for Nintendo and Chunghwa Telecom
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nintendo and Chunghwa is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo 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 Nintendo 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 Nintendo 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 Nintendo i.e., Nintendo and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Nintendo and Chunghwa Telecom
Assuming the 90 days trading horizon Nintendo Co is expected to generate 4.04 times more return on investment than Chunghwa Telecom. However, Nintendo is 4.04 times more volatile than Chunghwa Telecom Co. It trades about 0.06 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about -0.05 per unit of risk. If you would invest 1,430 in Nintendo Co on October 20, 2024 and sell it today you would earn a total of 30.00 from holding Nintendo Co or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nintendo Co vs. Chunghwa Telecom Co
Performance |
| Timeline |
| Nintendo |
| Chunghwa Telecom |
Nintendo and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nintendo and Chunghwa Telecom
The main advantage of trading using opposite Nintendo and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nintendo 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.| Nintendo vs. QINGCI GAMES INC | Nintendo vs. Hochschild Mining plc | Nintendo vs. International Game Technology | Nintendo vs. TITANIUM TRANSPORTGROUP |
| Chunghwa Telecom vs. Salesforce | Chunghwa Telecom vs. Gruppo Mutuionline SpA | Chunghwa Telecom vs. SENECA FOODS A | Chunghwa Telecom vs. Performance Food 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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