Correlation Between Taiwan Weighted and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted 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 Taiwan Weighted and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Chunghwa Telecom Co, you can compare the effects of market volatilities on Taiwan Weighted 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 Taiwan Weighted with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Chunghwa Telecom.
Diversification Opportunities for Taiwan Weighted and Chunghwa Telecom
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and Chunghwa is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Taiwan Weighted 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 Taiwan Weighted 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 Taiwan Weighted i.e., Taiwan Weighted and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Chunghwa Telecom
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the Chunghwa Telecom. In addition to that, Taiwan Weighted is 2.06 times more volatile than Chunghwa Telecom Co. It trades about -0.05 of its total potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.09 per unit of volatility. If you would invest 12,250 in Chunghwa Telecom Co on August 28, 2024 and sell it today you would earn a total of 100.00 from holding Chunghwa Telecom Co or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Taiwan Weighted vs. Chunghwa Telecom Co
Performance |
| Timeline |
Taiwan Weighted and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Chunghwa Telecom Co
Pair trading matchups for Chunghwa Telecom
Pair Trading with Taiwan Weighted and Chunghwa Telecom
The main advantage of trading using opposite Taiwan Weighted and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted 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.| Taiwan Weighted vs. Taichung Commercial Bank | Taiwan Weighted vs. China Times Publishing | Taiwan Weighted vs. First Insurance Co | Taiwan Weighted vs. Mega Financial Holding |
| Chunghwa Telecom vs. CTBC Financial Holding | Chunghwa Telecom vs. Fubon Financial Holding | Chunghwa Telecom vs. President Chain Store |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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