Correlation Between Corporate Travel and Hon Hai

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Can any of the company-specific risk be diversified away by investing in both Corporate Travel 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 Corporate Travel and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Corporate Travel Management and Hon Hai Precision, you can compare the effects of market volatilities on Corporate Travel 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 Corporate Travel with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Travel and Hon Hai.

Diversification Opportunities for Corporate Travel and Hon Hai

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Corporate and Hon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Travel Management 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 Corporate Travel 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 Corporate Travel Management 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 Corporate Travel i.e., Corporate Travel and Hon Hai go up and down completely randomly.

Pair Corralation between Corporate Travel and Hon Hai

Assuming the 90 days trading horizon Corporate Travel Management is expected to generate 0.67 times more return on investment than Hon Hai. However, Corporate Travel Management is 1.5 times less risky than Hon Hai. It trades about 0.24 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.2 per unit of risk. If you would invest  750.00  in Corporate Travel Management on September 12, 2024 and sell it today you would earn a total of  70.00  from holding Corporate Travel Management or generate 9.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Corporate Travel Management  vs.  Hon Hai Precision

 Performance 
       Timeline  
Corporate Travel Man 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Travel Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Corporate Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.
Hon Hai Precision 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hon Hai reported solid returns over the last few months and may actually be approaching a breakup point.

Corporate Travel and Hon Hai Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Corporate Travel and Hon Hai

The main advantage of trading using opposite Corporate Travel and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Travel 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.
The idea behind Corporate Travel Management and Hon Hai Precision 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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