Correlation Between Chunghwa Telecom and Central Reinsurance
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Central Reinsurance 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 Central Reinsurance 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 Central Reinsurance Corp, you can compare the effects of market volatilities on Chunghwa Telecom and Central Reinsurance 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 Central Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Central Reinsurance.
Diversification Opportunities for Chunghwa Telecom and Central Reinsurance
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chunghwa and Central is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Central Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Reinsurance Corp 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 Central Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Reinsurance Corp has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Central Reinsurance go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Central Reinsurance
Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to generate 0.47 times more return on investment than Central Reinsurance. However, Chunghwa Telecom Co is 2.14 times less risky than Central Reinsurance. It trades about 0.05 of its potential returns per unit of risk. Central Reinsurance Corp is currently generating about -0.14 per unit of risk. If you would invest 12,200 in Chunghwa Telecom Co on September 24, 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 | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Chunghwa Telecom Co vs. Central Reinsurance Corp
Performance |
Timeline |
Chunghwa Telecom |
Central Reinsurance Corp |
Chunghwa Telecom and Central Reinsurance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chunghwa Telecom and Central Reinsurance
The main advantage of trading using opposite Chunghwa Telecom and Central Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Central Reinsurance 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 Central Reinsurance will offset losses from the drop in Central Reinsurance'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 |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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