Correlation Between IDT and Chunghwa Telecom

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

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

Diversification Opportunities for IDT and Chunghwa Telecom

0.15

Correlation Coefficient

IDT  Chunghwa Telecom

Average diversification

The 3 months correlation between IDT and Chunghwa is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding IDT Corp. and Chunghwa Telecom Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Telecom and IDT 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 IDT Corporation are associated (or correlated) with Chunghwa Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Telecom has no effect on the direction of IDT i.e., IDT and Chunghwa Telecom go up and down completely randomly.

Pair Corralation between IDT and Chunghwa Telecom

Considering the 90-day investment horizon IDT Corporation is expected to generate 1.48 times more return on investment than Chunghwa Telecom. However, IDT is 1.48 times more volatile than Chunghwa Telecom Co. It trades about 0.11 of its potential returns per unit of risk. Chunghwa Telecom Co is currently generating about -0.09 per unit of risk. If you would invest  3,699  in IDT Corporation on February 5, 2024 and sell it today you would earn a total of  114.00  from holding IDT Corporation or generate 3.08% return on investment over 90 days.

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

IDT Corp.  vs.  Chunghwa Telecom Co

IDT Corporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IDT Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, IDT may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Chunghwa Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chunghwa Telecom Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Chunghwa Telecom is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IDT and Chunghwa Telecom

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

The idea behind IDT Corporation and Chunghwa Telecom 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.