Correlation Between Chunghwa Telecom and ELMOS SEMICONDUCTOR

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

Diversification Opportunities for Chunghwa Telecom and ELMOS SEMICONDUCTOR

0.26

Correlation Coefficient

Chunghwa Telecom  ELMOS SEMICONDUCTOR

Modest diversification

The 3 months correlation between Chunghwa and ELMOS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and ELMOS SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELMOS SEMICONDUCTOR 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 ELMOS SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELMOS SEMICONDUCTOR has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and ELMOS SEMICONDUCTOR go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and ELMOS SEMICONDUCTOR

Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 13.36 times less return on investment than ELMOS SEMICONDUCTOR. But when comparing it to its historical volatility, Chunghwa Telecom Co is 4.54 times less risky than ELMOS SEMICONDUCTOR. It trades about 0.05 of its potential returns per unit of risk. ELMOS SEMICONDUCTOR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,180  in ELMOS SEMICONDUCTOR on September 23, 2024 and sell it today you would earn a total of  460.00  from holding ELMOS SEMICONDUCTOR or generate 7.44% return on investment over 90 days.

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

Chunghwa Telecom Co  vs.  ELMOS SEMICONDUCTOR

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

ELMOS SEMICONDUCTOR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELMOS SEMICONDUCTOR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ELMOS SEMICONDUCTOR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chunghwa Telecom and ELMOS SEMICONDUCTOR

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

The idea behind Chunghwa Telecom Co and ELMOS SEMICONDUCTOR 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.