Correlation Between X FAB and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both X FAB 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 X FAB and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X FAB Silicon Foundries and Chunghwa Telecom Co, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Chunghwa Telecom.
Diversification Opportunities for X FAB and Chunghwa Telecom
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between XFB and Chunghwa is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between X FAB and Chunghwa Telecom
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Chunghwa Telecom. In addition to that, X FAB is 2.64 times more volatile than Chunghwa Telecom Co. It trades about -0.02 of its total potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.04 per unit of volatility. If you would invest 3,126 in Chunghwa Telecom Co on September 3, 2024 and sell it today you would earn a total of 474.00 from holding Chunghwa Telecom Co or generate 15.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Chunghwa Telecom Co
Performance |
| Timeline |
| X FAB Silicon |
| Chunghwa Telecom |
X FAB and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Chunghwa Telecom
The main advantage of trading using opposite X FAB and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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. 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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