Correlation Between AEON STORES and Chunghwa Telecom

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

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

Diversification Opportunities for AEON STORES and Chunghwa Telecom

-0.1

Correlation Coefficient

AEON STORES  Chunghwa Telecom

Good diversification

The 3 months correlation between AEON and Chunghwa is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and AEON STORES 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 AEON STORES 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 AEON STORES i.e., AEON STORES and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between AEON STORES and Chunghwa Telecom

Assuming the 90 days trading horizon AEON STORES is expected to under-perform the Chunghwa Telecom. In addition to that, AEON STORES is 1.2 times more volatile than Chunghwa Telecom Co. It trades about -0.03 of its total potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.0 per unit of volatility. If you would invest  3,580  in Chunghwa Telecom Co on December 23, 2024 and sell it today you would earn a total of  0.00  from holding Chunghwa Telecom Co or generate 0.0% return on investment over 90 days.

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

AEON STORES  vs.  Chunghwa Telecom Co

AEON STORES

Risk-Adjusted Performance

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AEON STORES is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Chunghwa Telecom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chunghwa Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chunghwa Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AEON STORES and Chunghwa Telecom

The main advantage of trading using opposite AEON STORES and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEON STORES 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 AEON STORES 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.