Correlation Between Hon Hai and Universal Textile
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Universal Textile 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 Universal Textile 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 Universal Textile Co, you can compare the effects of market volatilities on Hon Hai and Universal Textile 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 Universal Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Universal Textile.
Diversification Opportunities for Hon Hai and Universal Textile
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and Universal is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Universal Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Textile has no effect on the direction of Hon Hai i.e., Hon Hai and Universal Textile go up and down completely randomly.
Pair Corralation between Hon Hai and Universal Textile
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.1 times more return on investment than Universal Textile. However, Hon Hai is 1.1 times more volatile than Universal Textile Co. It trades about -0.11 of its potential returns per unit of risk. Universal Textile Co is currently generating about -0.18 per unit of risk. If you would invest 21,150 in Hon Hai Precision on August 25, 2024 and sell it today you would lose (850.00) from holding Hon Hai Precision or give up 4.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Universal Textile Co
Performance |
| Timeline |
| Hon Hai Precision |
| Universal Textile |
Hon Hai and Universal Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Universal Textile
The main advantage of trading using opposite Hon Hai and Universal Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Universal Textile 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 Universal Textile will offset losses from the drop in Universal Textile's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Universal Textile vs. Taiwan Semiconductor Manufacturing | Universal Textile vs. Hon Hai Precision | Universal Textile vs. MediaTek | Universal Textile vs. Chunghwa Telecom 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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