Correlation Between Air Lease and Chunghwa Telecom

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

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

Diversification Opportunities for Air Lease and Chunghwa Telecom

0.22

Correlation Coefficient

Air Lease  Chunghwa Telecom

Modest diversification

The 3 months correlation between Air and Chunghwa is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and Air Lease 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 Air Lease 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 Air Lease i.e., Air Lease and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between Air Lease and Chunghwa Telecom

Assuming the 90 days trading horizon Air Lease is expected to under-perform the Chunghwa Telecom. In addition to that, Air Lease is 2.36 times more volatile than Chunghwa Telecom Co. It trades about -0.02 of its total potential returns per unit of risk. Chunghwa Telecom Co is currently generating about -0.01 per unit of volatility. If you would invest  3,600  in Chunghwa Telecom Co on December 29, 2024 and sell it today you would lose (20.00) from holding Chunghwa Telecom Co or give up 0.56% of portfolio value over 90 days.

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

Air Lease  vs.  Chunghwa Telecom Co

Air Lease

Risk-Adjusted Performance

Very Weak

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

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Air Lease and Chunghwa Telecom

The main advantage of trading using opposite Air Lease and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease 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 Air Lease 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.