Correlation Between Chunghwa Telecom and Shanghai Commercial
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Shanghai Commercial 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 Shanghai Commercial 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 Shanghai Commercial Savings, you can compare the effects of market volatilities on Chunghwa Telecom and Shanghai Commercial 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 Shanghai Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Shanghai Commercial.
Diversification Opportunities for Chunghwa Telecom and Shanghai Commercial
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Chunghwa and Shanghai is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Shanghai Commercial Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Commercial 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 Shanghai Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Commercial has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Shanghai Commercial go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and Shanghai Commercial
Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 318.58 times less return on investment than Shanghai Commercial. But when comparing it to its historical volatility, Chunghwa Telecom Co is 3.21 times less risky than Shanghai Commercial. It trades about 0.0 of its potential returns per unit of risk. Shanghai Commercial Savings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,720 in Shanghai Commercial Savings on September 26, 2024 and sell it today you would earn a total of 315.00 from holding Shanghai Commercial Savings or generate 8.47% 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. Shanghai Commercial Savings
Performance |
Timeline |
Chunghwa Telecom |
Shanghai Commercial |
Chunghwa Telecom and Shanghai Commercial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chunghwa Telecom and Shanghai Commercial
The main advantage of trading using opposite Chunghwa Telecom and Shanghai Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, Shanghai Commercial 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 Shanghai Commercial will offset losses from the drop in Shanghai Commercial'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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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