Correlation Between International Business and Chunghwa Telecom

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

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

Diversification Opportunities for International Business and Chunghwa Telecom

0.26

Correlation Coefficient

International Business  Chunghwa Telecom

Modest diversification

The 3 months correlation between International and Chunghwa is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and International Business 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 International Business Machines 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 has no effect on the direction of International Business i.e., International Business and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between International Business and Chunghwa Telecom

Considering the 90-day investment horizon International Business Machines is expected to generate 1.8 times more return on investment than Chunghwa Telecom. However, International Business is 1.8 times more volatile than Chunghwa Telecom Co. It trades about 0.1 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about 0.01 per unit of risk. If you would invest  15,450  in International Business Machines on October 5, 2024 and sell it today you would earn a total of  6,544  from holding International Business Machines or generate 42.36% return on investment over 90 days.

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

International Business Machine  vs.  Chunghwa Telecom Co

International Business

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Chunghwa Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with International Business and Chunghwa Telecom

The main advantage of trading using opposite International Business and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.