Correlation Between Booking Holdings and Chunghwa Telecom

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

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

Diversification Opportunities for Booking Holdings and Chunghwa Telecom

-0.43

Correlation Coefficient

Booking Holdings  Chunghwa Telecom

Very good diversification

The 3 months correlation between Booking and Chunghwa is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Booking Holdings and Chunghwa Telecom Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom Co, and Booking Holdings 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 Booking Holdings 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 Co, has no effect on the direction of Booking Holdings i.e., Booking Holdings and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between Booking Holdings and Chunghwa Telecom

Assuming the 90 days trading horizon Booking Holdings is expected to under-perform the Chunghwa Telecom. But the stock apears to be less risky and, when comparing its historical volatility, Booking Holdings is 1.66 times less risky than Chunghwa Telecom. The stock trades about -0.09 of its potential returns per unit of risk. The Chunghwa Telecom Co, is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,316  in Chunghwa Telecom Co, on December 27, 2024 and sell it today you would earn a total of  1,318  from holding Chunghwa Telecom Co, or generate 30.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Booking Holdings  vs.  Chunghwa Telecom Co,

Booking Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Booking Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Chunghwa Telecom Co,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Telecom Co, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Chunghwa Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Booking Holdings and Chunghwa Telecom

The main advantage of trading using opposite Booking Holdings and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Booking Holdings 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 Booking Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.