Correlation Between Clover Health and Chunghwa Telecom

Can any of the company-specific risk be diversified away by investing in both Clover Health and Chunghwa Telecom 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 Clover Health and Chunghwa Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clover Health Investments, and Chunghwa Telecom Co,, you can compare the effects of market volatilities on Clover Health and Chunghwa Telecom 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 Clover Health with a short position of Chunghwa Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clover Health and Chunghwa Telecom.

Diversification Opportunities for Clover Health and Chunghwa Telecom

-0.09

Correlation Coefficient

Clover Health  Chunghwa Telecom

Good diversification

The 3 months correlation between Clover and Chunghwa is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, and Chunghwa Telecom Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom Co, and Clover Health 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 Clover Health Investments, are associated (or correlated) with Chunghwa Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Telecom Co, has no effect on the direction of Clover Health i.e., Clover Health and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between Clover Health and Chunghwa Telecom

Assuming the 90 days trading horizon Clover Health is expected to generate 3.26 times less return on investment than Chunghwa Telecom. In addition to that, Clover Health is 1.05 times more volatile than Chunghwa Telecom Co,. It trades about 0.04 of its total potential returns per unit of risk. Chunghwa Telecom Co, is currently generating about 0.13 per unit of volatility. If you would invest  4,316  in Chunghwa Telecom Co, on December 25, 2024 and sell it today you would earn a total of  1,318  from holding Chunghwa Telecom Co, or generate 30.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Clover Health Investments,  vs.  Chunghwa Telecom Co,

Clover Health Invest

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chunghwa Telecom Co,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Telecom Co, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Chunghwa Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clover Health and Chunghwa Telecom

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

The idea behind Clover Health Investments, and Chunghwa Telecom Co, 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.