Correlation Between Chung Hwa and Taiwan Mobile

Can any of the company-specific risk be diversified away by investing in both Chung Hwa and Taiwan Mobile 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 Chung Hwa and Taiwan Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chung Hwa Chemical and Taiwan Mobile Co, you can compare the effects of market volatilities on Chung Hwa and Taiwan Mobile 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 Chung Hwa with a short position of Taiwan Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hwa and Taiwan Mobile.

Diversification Opportunities for Chung Hwa and Taiwan Mobile

0.31

Correlation Coefficient

Chung Hwa  Taiwan Mobile

Weak diversification

The 3 months correlation between Chung and Taiwan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hwa Chemical and Taiwan Mobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Mobile and Chung Hwa 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 Chung Hwa Chemical are associated (or correlated) with Taiwan Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Mobile has no effect on the direction of Chung Hwa i.e., Chung Hwa and Taiwan Mobile go up and down completely randomly.

Pair Corralation between Chung Hwa and Taiwan Mobile

Assuming the 90 days trading horizon Chung Hwa Chemical is expected to under-perform the Taiwan Mobile. In addition to that, Chung Hwa is 3.0 times more volatile than Taiwan Mobile Co. It trades about -0.1 of its total potential returns per unit of risk. Taiwan Mobile Co is currently generating about -0.02 per unit of volatility. If you would invest  11,600  in Taiwan Mobile Co on September 16, 2024 and sell it today you would lose (150.00) from holding Taiwan Mobile Co or give up 1.29% of portfolio value over 90 days.

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

Chung Hwa Chemical  vs.  Taiwan Mobile Co

Chung Hwa Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hwa Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Mobile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Mobile is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chung Hwa and Taiwan Mobile

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

The idea behind Chung Hwa Chemical and Taiwan Mobile 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.