Correlation Between Hon Hai and ScinoPharm Taiwan
Can any of the company-specific risk be diversified away by investing in both Hon Hai and ScinoPharm Taiwan 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 ScinoPharm Taiwan 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 ScinoPharm Taiwan, you can compare the effects of market volatilities on Hon Hai and ScinoPharm Taiwan 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 ScinoPharm Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and ScinoPharm Taiwan.
Diversification Opportunities for Hon Hai and ScinoPharm Taiwan
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and ScinoPharm is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and ScinoPharm Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScinoPharm Taiwan 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 ScinoPharm Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScinoPharm Taiwan has no effect on the direction of Hon Hai i.e., Hon Hai and ScinoPharm Taiwan go up and down completely randomly.
Pair Corralation between Hon Hai and ScinoPharm Taiwan
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 2.36 times more return on investment than ScinoPharm Taiwan. However, Hon Hai is 2.36 times more volatile than ScinoPharm Taiwan. It trades about 0.07 of its potential returns per unit of risk. ScinoPharm Taiwan is currently generating about -0.25 per unit of risk. If you would invest 18,700 in Hon Hai Precision on September 3, 2024 and sell it today you would earn a total of 850.00 from holding Hon Hai Precision or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. ScinoPharm Taiwan
Performance |
| Timeline |
| Hon Hai Precision |
| ScinoPharm Taiwan |
Hon Hai and ScinoPharm Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and ScinoPharm Taiwan
The main advantage of trading using opposite Hon Hai and ScinoPharm Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, ScinoPharm Taiwan 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 ScinoPharm Taiwan will offset losses from the drop in ScinoPharm Taiwan's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| ScinoPharm Taiwan vs. Tehmag Foods | ScinoPharm Taiwan vs. HIM International Music | ScinoPharm Taiwan vs. Standard Foods Corp | ScinoPharm Taiwan vs. GameSparcs 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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