Correlation Between Chunghwa Telecom and TAL Education

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

Diversification Opportunities for Chunghwa Telecom and TAL Education

-0.43

Correlation Coefficient

Chunghwa Telecom  TAL Education

Very good diversification

The 3 months correlation between Chunghwa and TAL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and TAL Education go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and TAL Education

Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to generate 0.32 times more return on investment than TAL Education. However, Chunghwa Telecom Co is 3.13 times less risky than TAL Education. It trades about 0.08 of its potential returns per unit of risk. TAL Education Group is currently generating about -0.02 per unit of risk. If you would invest  3,420  in Chunghwa Telecom Co on October 12, 2024 and sell it today you would earn a total of  160.00  from holding Chunghwa Telecom Co or generate 4.68% 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.  TAL Education Group

Chunghwa Telecom

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Telecom Co are ranked lower than 6 (%) 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.

TAL Education Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TAL Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TAL Education is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Chunghwa Telecom and TAL Education

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

The idea behind Chunghwa Telecom Co and TAL Education Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.