Correlation Between Chunghwa Telecom and Mitsubishi UFJ

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

Diversification Opportunities for Chunghwa Telecom and Mitsubishi UFJ

0.18

Correlation Coefficient

Chunghwa Telecom  Mitsubishi UFJ

Average diversification

The 3 months correlation between Chunghwa and Mitsubishi is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Chunghwa Telecom Co and Mitsubishi UFJ Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Financial 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 Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Financial has no effect on the direction of Chunghwa Telecom i.e., Chunghwa Telecom and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Chunghwa Telecom and Mitsubishi UFJ

Considering the 90-day investment horizon Chunghwa Telecom is expected to generate 1.69 times less return on investment than Mitsubishi UFJ. But when comparing it to its historical volatility, Chunghwa Telecom Co is 1.61 times less risky than Mitsubishi UFJ. It trades about 0.06 of its potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,020  in Mitsubishi UFJ Financial on March 12, 2024 and sell it today you would earn a total of  15.00  from holding Mitsubishi UFJ Financial or generate 1.47% return on investment over 90 days.

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

Chunghwa Telecom Co  vs.  Mitsubishi UFJ Financial

Chunghwa Telecom

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chunghwa Telecom Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Chunghwa Telecom is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi UFJ Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Mitsubishi UFJ is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chunghwa Telecom and Mitsubishi UFJ

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

The idea behind Chunghwa Telecom Co and Mitsubishi UFJ Financial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.