Correlation Between Fannie Mae and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Fannie Mae and Hon Hai 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 Fannie Mae and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fannie Mae and Hon Hai Precision, you can compare the effects of market volatilities on Fannie Mae and Hon Hai 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 Fannie Mae with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fannie Mae and Hon Hai.
Diversification Opportunities for Fannie Mae and Hon Hai
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fannie and Hon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fannie Mae and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision and Fannie Mae 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 Fannie Mae are associated (or correlated) with Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of Fannie Mae i.e., Fannie Mae and Hon Hai go up and down completely randomly.
Pair Corralation between Fannie Mae and Hon Hai
Assuming the 90 days trading horizon Fannie Mae is expected to generate 6.51 times more return on investment than Hon Hai. However, Fannie Mae is 6.51 times more volatile than Hon Hai Precision. It trades about 0.39 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.22 per unit of risk. If you would invest 138.00 in Fannie Mae on August 31, 2024 and sell it today you would earn a total of 180.00 from holding Fannie Mae or generate 130.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Fannie Mae vs. Hon Hai Precision
Performance |
| Timeline |
| Fannie Mae |
| Hon Hai Precision |
Fannie Mae and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fannie Mae and Hon Hai
The main advantage of trading using opposite Fannie Mae and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fannie Mae position performs unexpectedly, Hon Hai 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 Hon Hai will offset losses from the drop in Hon Hai's long position.| Fannie Mae vs. United Internet AG | Fannie Mae vs. Live Nation Entertainment | Fannie Mae vs. Gamma Communications PLC | Fannie Mae vs. Prosiebensat 1 Media |
| Hon Hai vs. McEwen Mining | Hon Hai vs. DFS Furniture PLC | Hon Hai vs. Beazer Homes USA | Hon Hai vs. Home Depot |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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