Correlation Between Hon Hai and Southeast Cement
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Southeast Cement 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 Hon Hai and Southeast Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hon Hai Precision and Southeast Cement Co, you can compare the effects of market volatilities on Hon Hai and Southeast Cement 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 Hon Hai with a short position of Southeast Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Southeast Cement.
Diversification Opportunities for Hon Hai and Southeast Cement
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hon and Southeast is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Southeast Cement Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southeast Cement and Hon Hai 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 Hon Hai Precision are associated (or correlated) with Southeast Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southeast Cement has no effect on the direction of Hon Hai i.e., Hon Hai and Southeast Cement go up and down completely randomly.
Pair Corralation between Hon Hai and Southeast Cement
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.32 times more return on investment than Southeast Cement. However, Hon Hai is 1.32 times more volatile than Southeast Cement Co. It trades about 0.05 of its potential returns per unit of risk. Southeast Cement Co is currently generating about -0.05 per unit of risk. If you would invest 17,550 in Hon Hai Precision on September 3, 2024 and sell it today you would earn a total of 2,000 from holding Hon Hai Precision or generate 11.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Southeast Cement Co
Performance |
| Timeline |
| Hon Hai Precision |
| Southeast Cement |
Hon Hai and Southeast Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Southeast Cement
The main advantage of trading using opposite Hon Hai and Southeast Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Southeast Cement 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 Southeast Cement will offset losses from the drop in Southeast Cement's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Southeast Cement vs. Chia Hsin Cement | Southeast Cement vs. Lucky Cement Co | Southeast Cement vs. Hsing Ta Cement | Southeast Cement vs. Universal Cement Corp |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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