Correlation Between Hon Hai and Taiwan Sanyo
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Taiwan Sanyo 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 Taiwan Sanyo 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 Taiwan Sanyo Electric, you can compare the effects of market volatilities on Hon Hai and Taiwan Sanyo 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 Taiwan Sanyo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Taiwan Sanyo.
Diversification Opportunities for Hon Hai and Taiwan Sanyo
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and Taiwan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Taiwan Sanyo Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Sanyo Electric 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 Taiwan Sanyo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Sanyo Electric has no effect on the direction of Hon Hai i.e., Hon Hai and Taiwan Sanyo go up and down completely randomly.
Pair Corralation between Hon Hai and Taiwan Sanyo
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.87 times more return on investment than Taiwan Sanyo. However, Hon Hai is 1.87 times more volatile than Taiwan Sanyo Electric. It trades about 0.08 of its potential returns per unit of risk. Taiwan Sanyo Electric is currently generating about 0.02 per unit of risk. If you would invest 9,501 in Hon Hai Precision on October 25, 2024 and sell it today you would earn a total of 8,499 from holding Hon Hai Precision or generate 89.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hon Hai Precision vs. Taiwan Sanyo Electric
Performance |
| Timeline |
| Hon Hai Precision |
| Taiwan Sanyo Electric |
Hon Hai and Taiwan Sanyo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Taiwan Sanyo
The main advantage of trading using opposite Hon Hai and Taiwan Sanyo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Taiwan Sanyo 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 Taiwan Sanyo will offset losses from the drop in Taiwan Sanyo's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Taiwan Sanyo vs. Sampo Corp | Taiwan Sanyo vs. China Electric Manufacturing | Taiwan Sanyo vs. Walsin Lihwa Corp | Taiwan Sanyo vs. Ta Ya Electric |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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