Correlation Between SPARTAN STORES and Chunghwa Telecom

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

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

Diversification Opportunities for SPARTAN STORES and Chunghwa Telecom

0.11

Correlation Coefficient

SPARTAN STORES  Chunghwa Telecom

Average diversification

The 3 months correlation between SPARTAN and Chunghwa is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and SPARTAN STORES 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 SPARTAN STORES 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 SPARTAN STORES i.e., SPARTAN STORES and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between SPARTAN STORES and Chunghwa Telecom

Assuming the 90 days trading horizon SPARTAN STORES is expected to generate 2.54 times more return on investment than Chunghwa Telecom. However, SPARTAN STORES is 2.54 times more volatile than Chunghwa Telecom Co. It trades about 0.05 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about -0.02 per unit of risk. If you would invest  1,741  in SPARTAN STORES on December 24, 2024 and sell it today you would earn a total of  89.00  from holding SPARTAN STORES or generate 5.11% return on investment over 90 days.

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

SPARTAN STORES  vs.  Chunghwa Telecom Co

SPARTAN STORES

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPARTAN STORES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking indicators, SPARTAN STORES may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chunghwa Telecom

Risk-Adjusted Performance

Very 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPARTAN STORES and Chunghwa Telecom

The main advantage of trading using opposite SPARTAN STORES and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN STORES 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 SPARTAN STORES 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.