Correlation Between Chunghwa Telecom and CANON MARKETING

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

Diversification Opportunities for Chunghwa Telecom and CANON MARKETING

0.74

Correlation Coefficient

Chunghwa Telecom  CANON MARKETING

Poor diversification

The 3 months correlation between Chunghwa and CANON is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and CANON MARKETING JP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANON MARKETING JP 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 CANON MARKETING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANON MARKETING JP has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and CANON MARKETING go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and CANON MARKETING

Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 3.4 times less return on investment than CANON MARKETING. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.68 times less risky than CANON MARKETING. It trades about 0.03 of its potential returns per unit of risk. CANON MARKETING JP is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,000  in CANON MARKETING JP on October 4, 2024 and sell it today you would earn a total of  1,140  from holding CANON MARKETING JP or generate 57.0% return on investment over 90 days.

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

Chunghwa Telecom Co  vs.  CANON MARKETING JP

Chunghwa Telecom

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Telecom Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chunghwa Telecom is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CANON MARKETING JP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CANON MARKETING JP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking indicators, CANON MARKETING may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chunghwa Telecom and CANON MARKETING

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

The idea behind Chunghwa Telecom Co and CANON MARKETING JP 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.