Correlation Between Hon Hai and Nankang Rubber
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Nankang Rubber 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 Nankang Rubber 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 Nankang Rubber Tire, you can compare the effects of market volatilities on Hon Hai and Nankang Rubber 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 Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Nankang Rubber.
Diversification Opportunities for Hon Hai and Nankang Rubber
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and Nankang is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire 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 Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Hon Hai i.e., Hon Hai and Nankang Rubber go up and down completely randomly.
Pair Corralation between Hon Hai and Nankang Rubber
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.07 times more return on investment than Nankang Rubber. However, Hon Hai is 1.07 times more volatile than Nankang Rubber Tire. It trades about 0.09 of its potential returns per unit of risk. Nankang Rubber Tire is currently generating about 0.05 per unit of risk. If you would invest 9,730 in Hon Hai Precision on August 28, 2024 and sell it today you would earn a total of 11,320 from holding Hon Hai Precision or generate 116.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Nankang Rubber Tire
Performance |
| Timeline |
| Hon Hai Precision |
| Nankang Rubber Tire |
Hon Hai and Nankang Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Nankang Rubber
The main advantage of trading using opposite Hon Hai and Nankang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Nankang Rubber 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 Nankang Rubber will offset losses from the drop in Nankang Rubber's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Nankang Rubber vs. Taiwan Semiconductor Manufacturing | Nankang Rubber vs. Hon Hai Precision | Nankang Rubber vs. MediaTek | Nankang Rubber 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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