Correlation Between Taiwan Mobile and Chief Telecom

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

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

Diversification Opportunities for Taiwan Mobile and Chief Telecom

0.61

Correlation Coefficient

Taiwan Mobile  Chief Telecom

Poor diversification

The 3 months correlation between Taiwan and Chief is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Mobile Co and Chief Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chief Telecom and Taiwan Mobile 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 Taiwan Mobile Co are associated (or correlated) with Chief Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chief Telecom has no effect on the direction of Taiwan Mobile i.e., Taiwan Mobile and Chief Telecom go up and down completely randomly.

Pair Corralation between Taiwan Mobile and Chief Telecom

Assuming the 90 days trading horizon Taiwan Mobile Co is expected to generate 0.62 times more return on investment than Chief Telecom. However, Taiwan Mobile Co is 1.62 times less risky than Chief Telecom. It trades about 0.03 of its potential returns per unit of risk. Chief Telecom is currently generating about -0.1 per unit of risk. If you would invest  10,400  in Taiwan Mobile Co on February 7, 2024 and sell it today you would earn a total of  50.00  from holding Taiwan Mobile Co or generate 0.48% return on investment over 90 days.

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

Taiwan Mobile Co  vs.  Chief Telecom

Taiwan Mobile

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Mobile Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Taiwan Mobile may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Chief Telecom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chief Telecom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chief Telecom showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taiwan Mobile and Chief Telecom

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

The idea behind Taiwan Mobile Co and Chief Telecom 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.