Correlation Between Chunghwa Telecom and Prince Housing

Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Prince Housing 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 Chunghwa Telecom and Prince Housing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chunghwa Telecom Co and Prince Housing Development, you can compare the effects of market volatilities on Chunghwa Telecom and Prince Housing 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 Chunghwa Telecom with a short position of Prince Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Prince Housing.

Diversification Opportunities for Chunghwa Telecom and Prince Housing

0.31

Correlation Coefficient

Chunghwa Telecom  Prince Housing

Weak diversification

The 3 months correlation between Chunghwa and Prince is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Prince Housing Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prince Housing Devel and Chunghwa Telecom 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 Chunghwa Telecom Co are associated (or correlated) with Prince Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prince Housing Devel has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Prince Housing go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and Prince Housing

Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to generate 0.45 times more return on investment than Prince Housing. However, Chunghwa Telecom Co is 2.21 times less risky than Prince Housing. It trades about 0.04 of its potential returns per unit of risk. Prince Housing Development is currently generating about 0.0 per unit of risk. If you would invest  11,250  in Chunghwa Telecom Co on September 26, 2024 and sell it today you would earn a total of  1,150  from holding Chunghwa Telecom Co or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Chunghwa Telecom Co  vs.  Prince Housing Development

Chunghwa Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chunghwa Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chunghwa Telecom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Prince Housing Devel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prince Housing Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Prince Housing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chunghwa Telecom and Prince Housing

The main advantage of trading using opposite Chunghwa Telecom and Prince Housing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Prince Housing 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 Prince Housing will offset losses from the drop in Prince Housing's long position.

The idea behind Chunghwa Telecom Co and Prince Housing Development 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.

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.