Correlation Between U S Cellular and Chunghwa Telecom

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

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

Diversification Opportunities for U S Cellular and Chunghwa Telecom

-0.41

Correlation Coefficient

U S Cellular  Chunghwa Telecom

Very good diversification

The 3 months correlation between USM and Chunghwa is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and U S Cellular 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 United States Cellular 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 U S Cellular i.e., U S Cellular and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between U S Cellular and Chunghwa Telecom

Considering the 90-day investment horizon United States Cellular is expected to generate 3.57 times more return on investment than Chunghwa Telecom. However, U S Cellular is 3.57 times more volatile than Chunghwa Telecom Co. It trades about 0.02 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about -0.3 per unit of risk. If you would invest  6,312  in United States Cellular on October 5, 2024 and sell it today you would earn a total of  22.00  from holding United States Cellular or generate 0.35% return on investment over 90 days.

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

United States Cellular  vs.  Chunghwa Telecom Co

United States Cellular

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, U S Cellular displayed solid returns over the last few months and may actually be approaching a breakup point.

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 U S Cellular and Chunghwa Telecom

The main advantage of trading using opposite U S Cellular and Chunghwa Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U S Cellular 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 United States Cellular 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.