Correlation Between Hon Hai and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both Hon Hai and United Microelectronics 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 United Microelectronics 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 United Microelectronics, you can compare the effects of market volatilities on Hon Hai and United Microelectronics 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 United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and United Microelectronics.
Diversification Opportunities for Hon Hai and United Microelectronics
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hon and United is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics 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 United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Hon Hai i.e., Hon Hai and United Microelectronics go up and down completely randomly.
Pair Corralation between Hon Hai and United Microelectronics
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.46 times more return on investment than United Microelectronics. However, Hon Hai is 1.46 times more volatile than United Microelectronics. It trades about -0.15 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.3 per unit of risk. If you would invest 20,950 in Hon Hai Precision on August 30, 2024 and sell it today you would lose (1,300) from holding Hon Hai Precision or give up 6.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. United Microelectronics
Performance |
| Timeline |
| Hon Hai Precision |
| United Microelectronics |
Hon Hai and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and United Microelectronics
The main advantage of trading using opposite Hon Hai and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, United Microelectronics 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 United Microelectronics will offset losses from the drop in United Microelectronics' long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| United Microelectronics vs. Sitronix Technology Corp | United Microelectronics vs. Elan Microelectronics Corp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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