Correlation Between Chunghwa Telecom and Natural Health

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

Diversification Opportunities for Chunghwa Telecom and Natural Health

0.18

Correlation Coefficient

Chunghwa Telecom  Natural Health

Average diversification

The 3 months correlation between Chunghwa and Natural is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Natural Health Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Health Trends 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 Natural Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Health Trends has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Natural Health go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and Natural Health

Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 49.37 times less return on investment than Natural Health. But when comparing it to its historical volatility, Chunghwa Telecom Co is 3.34 times less risky than Natural Health. It trades about 0.0 of its potential returns per unit of risk. Natural Health Trends is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  423.00  in Natural Health Trends on December 31, 2024 and sell it today you would earn a total of  37.00  from holding Natural Health Trends or generate 8.75% return on investment over 90 days.

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

Chunghwa Telecom Co  vs.  Natural Health Trends

Chunghwa Telecom

Risk-Adjusted Performance

Weak

Over the last 90 days Chunghwa Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Natural Health Trends

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Health Trends are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Natural Health may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Chunghwa Telecom and Natural Health

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

The idea behind Chunghwa Telecom Co and Natural Health Trends 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.