Correlation Between Chunghwa Telecom and ASE Industrial
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and ASE Industrial 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 ASE Industrial 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 ASE Industrial Holding, you can compare the effects of market volatilities on Chunghwa Telecom and ASE Industrial 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 ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and ASE Industrial.
Diversification Opportunities for Chunghwa Telecom and ASE Industrial
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chunghwa and ASE is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and ASE Industrial go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and ASE Industrial
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 2.86 times less return on investment than ASE Industrial. But when comparing it to its historical volatility, Chunghwa Telecom Co is 4.99 times less risky than ASE Industrial. It trades about 0.16 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 15,450 in ASE Industrial Holding on December 2, 2024 and sell it today you would earn a total of 1,650 from holding ASE Industrial Holding or generate 10.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Chunghwa Telecom Co vs. ASE Industrial Holding
Performance |
Timeline |
Chunghwa Telecom |
ASE Industrial Holding |
Chunghwa Telecom and ASE Industrial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chunghwa Telecom and ASE Industrial
The main advantage of trading using opposite Chunghwa Telecom and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial'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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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