Correlation Between Chunghwa Telecom and Companhia

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

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

Diversification Opportunities for Chunghwa Telecom and Companhia

-0.56

Correlation Coefficient

Chunghwa Telecom  Companhia

Excellent diversification

The 3 months correlation between Chunghwa and Companhia is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co, and Companhia de Fiacao in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Fiacao and Chunghwa Telecom 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 Chunghwa Telecom Co, are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Fiacao has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Companhia go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and Companhia

Assuming the 90 days trading horizon Chunghwa Telecom Co, is expected to generate 1.56 times more return on investment than Companhia. However, Chunghwa Telecom is 1.56 times more volatile than Companhia de Fiacao. It trades about 0.13 of its potential returns per unit of risk. Companhia de Fiacao is currently generating about -0.11 per unit of risk. If you would invest  4,316  in Chunghwa Telecom Co, on December 26, 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	100.0%
Values	Daily Returns

Chunghwa Telecom Co,  vs.  Companhia de Fiacao

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.

Companhia de Fiacao

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia de Fiacao has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Chunghwa Telecom and Companhia

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

The idea behind Chunghwa Telecom Co, and Companhia de Fiacao 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.