Correlation Between Chunghwa Telecom and Accton Technology

Can any of the company-specific risk be diversified away by investing in both Chunghwa Telecom and Accton Technology 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 Accton Technology 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 Accton Technology Corp, you can compare the effects of market volatilities on Chunghwa Telecom and Accton Technology 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 Accton Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chunghwa Telecom and Accton Technology.

Diversification Opportunities for Chunghwa Telecom and Accton Technology

0.23

Correlation Coefficient

Chunghwa Telecom  Accton Technology

Modest diversification

The 3 months correlation between Chunghwa and Accton is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Accton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accton Technology Corp 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 Accton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accton Technology Corp has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Accton Technology go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and Accton Technology

Assuming the 90 days trading horizon Chunghwa Telecom is expected to generate 356.86 times less return on investment than Accton Technology. But when comparing it to its historical volatility, Chunghwa Telecom Co is 3.51 times less risky than Accton Technology. It trades about 0.0 of its potential returns per unit of risk. Accton Technology Corp is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  45,400  in Accton Technology Corp on March 13, 2024 and sell it today you would earn a total of  7,800  from holding Accton Technology Corp or generate 17.18% return on investment over 90 days.

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

Chunghwa Telecom Co  vs.  Accton Technology Corp

Chunghwa Telecom

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Telecom Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chunghwa Telecom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Accton Technology Corp

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Chunghwa Telecom and Accton Technology

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

The idea behind Chunghwa Telecom Co and Accton Technology Corp 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.