Correlation Between Hon Hai and I Hwa
Can any of the company-specific risk be diversified away by investing in both Hon Hai and I Hwa 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 I Hwa 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 I Hwa Industrial Co, you can compare the effects of market volatilities on Hon Hai and I Hwa 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 I Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and I Hwa.
Diversification Opportunities for Hon Hai and I Hwa
Very good diversification
The 3 months correlation between Hon and 1456 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and I Hwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Hwa Industrial 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 I Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Hwa Industrial has no effect on the direction of Hon Hai i.e., Hon Hai and I Hwa go up and down completely randomly.
Pair Corralation between Hon Hai and I Hwa
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.72 times more return on investment than I Hwa. However, Hon Hai Precision is 1.39 times less risky than I Hwa. It trades about -0.18 of its potential returns per unit of risk. I Hwa Industrial Co is currently generating about -0.13 per unit of risk. If you would invest 21,150 in Hon Hai Precision on September 1, 2024 and sell it today you would lose (1,600) from holding Hon Hai Precision or give up 7.57% 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. I Hwa Industrial Co
Performance |
| Timeline |
| Hon Hai Precision |
| I Hwa Industrial |
Hon Hai and I Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and I Hwa
The main advantage of trading using opposite Hon Hai and I Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, I Hwa 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 I Hwa will offset losses from the drop in I Hwa's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| I Hwa vs. Chaintech Technology Corp | I Hwa vs. AVerMedia Technologies | I Hwa vs. Avision | I Hwa 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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