Correlation Between Chunghwa Telecom and Western Digital

Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Western Digital 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 Western Digital 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 Western Digital, you can compare the effects of market volatilities on Chunghwa Telecom and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Western Digital.

Diversification Opportunities for Chunghwa Telecom and Western Digital

-0.42

Correlation Coefficient

Chunghwa Telecom  Western Digital

Very good diversification

The 3 months correlation between Chunghwa and Western is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co, and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Western Digital go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and Western Digital

Assuming the 90 days trading horizon Chunghwa Telecom Co, is expected to generate 0.82 times more return on investment than Western Digital. However, Chunghwa Telecom Co, is 1.22 times less risky than Western Digital. It trades about 0.13 of its potential returns per unit of risk. Western Digital is currently generating about -0.14 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.  Western Digital

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.

Western Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Chunghwa Telecom and Western Digital

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

The idea behind Chunghwa Telecom Co, and Western Digital 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..