Correlation Between Abnova Taiwan and Chunghwa Telecom

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

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

Diversification Opportunities for Abnova Taiwan and Chunghwa Telecom

0.13

Correlation Coefficient

Abnova Taiwan  Chunghwa Telecom

Average diversification

The 3 months correlation between Abnova and Chunghwa is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Abnova Taiwan Corp and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Abnova Taiwan 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 Abnova Taiwan Corp are associated (or correlated) with Chunghwa Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Telecom has no effect on the direction of Abnova Taiwan i.e., Abnova Taiwan and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between Abnova Taiwan and Chunghwa Telecom

Assuming the 90 days trading horizon Abnova Taiwan Corp is expected to under-perform the Chunghwa Telecom. In addition to that, Abnova Taiwan is 2.08 times more volatile than Chunghwa Telecom Co. It trades about -0.04 of its total potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.03 per unit of volatility. If you would invest  11,400  in Chunghwa Telecom Co on October 4, 2024 and sell it today you would earn a total of  900.00  from holding Chunghwa Telecom Co or generate 7.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Abnova Taiwan Corp  vs.  Chunghwa Telecom Co

Abnova Taiwan Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Abnova Taiwan and Chunghwa Telecom

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

The idea behind Abnova Taiwan Corp and Chunghwa Telecom Co 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.