Correlation Between Hon Hai and Tung Ho
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Tung Ho 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 Tung Ho 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 Tung Ho Textile, you can compare the effects of market volatilities on Hon Hai and Tung Ho 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 Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Tung Ho.
Diversification Opportunities for Hon Hai and Tung Ho
Good diversification
The 3 months correlation between Hon and Tung is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile 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 Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Hon Hai i.e., Hon Hai and Tung Ho go up and down completely randomly.
Pair Corralation between Hon Hai and Tung Ho
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Tung Ho. In addition to that, Hon Hai is 1.37 times more volatile than Tung Ho Textile. It trades about -0.18 of its total potential returns per unit of risk. Tung Ho Textile is currently generating about 0.03 per unit of volatility. If you would invest 2,355 in Tung Ho Textile on September 1, 2024 and sell it today you would earn a total of 20.00 from holding Tung Ho Textile or generate 0.85% 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. Tung Ho Textile
Performance |
| Timeline |
| Hon Hai Precision |
| Tung Ho Textile |
Hon Hai and Tung Ho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Tung Ho
The main advantage of trading using opposite Hon Hai and Tung Ho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Tung Ho 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 Tung Ho will offset losses from the drop in Tung Ho's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Tung Ho vs. Chaintech Technology Corp | Tung Ho vs. AVerMedia Technologies | Tung Ho vs. Avision | Tung Ho vs. Clevo Co |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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