Correlation Between Chunghwa Telecom and GCS Holdings
Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and GCS Holdings 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 Chunghwa Telecom and GCS Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chunghwa Telecom Co and GCS Holdings, you can compare the effects of market volatilities on Chunghwa Telecom and GCS Holdings 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 Chunghwa Telecom with a short position of GCS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and GCS Holdings.
Diversification Opportunities for Chunghwa Telecom and GCS Holdings
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chunghwa and GCS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and GCS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCS Holdings and Chunghwa Telecom 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 Chunghwa Telecom Co are associated (or correlated) with GCS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCS Holdings has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and GCS Holdings go up and down completely randomly.
Pair Corralation between Chunghwa Telecom and GCS Holdings
Assuming the 90 days trading horizon Chunghwa Telecom Co is expected to under-perform the GCS Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Chunghwa Telecom Co is 8.97 times less risky than GCS Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The GCS Holdings is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 4,100 in GCS Holdings on September 25, 2024 and sell it today you would earn a total of 9,350 from holding GCS Holdings or generate 228.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Chunghwa Telecom Co vs. GCS Holdings
Performance |
Timeline |
Chunghwa Telecom |
GCS Holdings |
Chunghwa Telecom and GCS Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chunghwa Telecom and GCS Holdings
The main advantage of trading using opposite Chunghwa Telecom and GCS Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chunghwa Telecom position performs unexpectedly, GCS Holdings 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 GCS Holdings will offset losses from the drop in GCS Holdings' long position.Chunghwa Telecom vs. Taiwan Mobile Co | Chunghwa Telecom vs. China Steel Corp | Chunghwa Telecom vs. Formosa Plastics Corp | Chunghwa Telecom vs. Cathay Financial Holding |
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Check out your portfolio center.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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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