Correlation Between Summit Materials and Chunghwa Telecom
Can any of the company-specific risk be diversified away by investing in both Summit Materials 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 Summit Materials and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Chunghwa Telecom Co, you can compare the effects of market volatilities on Summit Materials 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 Summit Materials with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Chunghwa Telecom.
Diversification Opportunities for Summit Materials and Chunghwa Telecom
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Summit and Chunghwa is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and Chunghwa Telecom go up and down completely randomly.
Pair Corralation between Summit Materials and Chunghwa Telecom
Assuming the 90 days trading horizon Summit Materials is expected to generate 0.68 times more return on investment than Chunghwa Telecom. However, Summit Materials is 1.46 times less risky than Chunghwa Telecom. It trades about 0.11 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.05 per unit of risk. If you would invest 4,820 in Summit Materials on September 25, 2024 and sell it today you would earn a total of 40.00 from holding Summit Materials or generate 0.83% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Summit Materials vs. Chunghwa Telecom Co
Performance |
Timeline |
Summit Materials |
Chunghwa Telecom |
Summit Materials and Chunghwa Telecom Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Materials and Chunghwa Telecom
The main advantage of trading using opposite Summit Materials and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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.Summit Materials vs. ADRIATIC METALS LS 013355 | Summit Materials vs. BW OFFSHORE LTD | Summit Materials vs. Playtech plc | Summit Materials vs. GLG LIFE TECH |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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