Correlation Between Chunghwa Telecom and Union Bank
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Union Bank 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 Union Bank 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 Union Bank of, you can compare the effects of market volatilities on Chunghwa Telecom and Union Bank 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 Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Union Bank.
Diversification Opportunities for Chunghwa Telecom and Union Bank
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Chunghwa and Union is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Union Bank go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Union Bank
Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to under-perform the Union Bank. But the stock apears to be less risky and, when comparing its historical volatility, Chunghwa Telecom Co is 1.37 times less risky than Union Bank. The stock trades about -0.04 of its potential returns per unit of risk. The Union Bank of is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,545 in Union Bank of on September 25, 2024 and sell it today you would lose (10.00) from holding Union Bank of or give up 0.65% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Chunghwa Telecom Co vs. Union Bank of
Performance |
Timeline |
Chunghwa Telecom |
Union Bank |
Chunghwa Telecom and Union Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chunghwa Telecom and Union Bank
The main advantage of trading using opposite Chunghwa Telecom and Union Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Union Bank 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 Union Bank will offset losses from the drop in Union Bank's long position.Chunghwa Telecom vs. Taiwan Mobile Co | Chunghwa Telecom vs. China Steel Corp | Chunghwa Telecom vs. Formosa Plastics Corp | Chunghwa Telecom vs. Cathay Financial Holding |
Union Bank vs. Taiwan Semiconductor Manufacturing | Union Bank vs. Hon Hai Precision | Union Bank vs. MediaTek | Union Bank vs. Chunghwa Telecom Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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