Correlation Between Chunghwa Telecom and J+J SNACK

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

Diversification Opportunities for Chunghwa Telecom and J+J SNACK

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Chunghwa and J+J is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and JJ SNACK FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JJ SNACK FOODS 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 J+J SNACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JJ SNACK FOODS has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and J+J SNACK go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and J+J SNACK

Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 1.11 times less return on investment than J+J SNACK. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.37 times less risky than J+J SNACK. It trades about 0.04 of its potential returns per unit of risk. JJ SNACK FOODS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  14,126  in JJ SNACK FOODS on September 5, 2024 and sell it today you would earn a total of  2,174  from holding JJ SNACK FOODS or generate 15.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Chunghwa Telecom Co  vs.  JJ SNACK FOODS

 Performance 
       Timeline  
Chunghwa Telecom 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.
JJ SNACK FOODS 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in JJ SNACK FOODS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, J+J SNACK is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Chunghwa Telecom and J+J SNACK Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chunghwa Telecom and J+J SNACK

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

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