Correlation Between Hon Hai and Delta Electronics
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Delta Electronics 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 Delta Electronics 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 Delta Electronics, you can compare the effects of market volatilities on Hon Hai and Delta Electronics 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 Delta Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Delta Electronics.
Diversification Opportunities for Hon Hai and Delta Electronics
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hon and Delta is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Delta Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics 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 Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics has no effect on the direction of Hon Hai i.e., Hon Hai and Delta Electronics go up and down completely randomly.
Pair Corralation between Hon Hai and Delta Electronics
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.99 times more return on investment than Delta Electronics. However, Hon Hai Precision is 1.01 times less risky than Delta Electronics. It trades about 0.09 of its potential returns per unit of risk. Delta Electronics is currently generating about 0.03 per unit of risk. If you would invest 10,064 in Hon Hai Precision on August 24, 2024 and sell it today you would earn a total of 10,236 from holding Hon Hai Precision or generate 101.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Delta Electronics
Performance |
| Timeline |
| Hon Hai Precision |
| Delta Electronics |
Hon Hai and Delta Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Delta Electronics
The main advantage of trading using opposite Hon Hai and Delta Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Delta Electronics 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 Delta Electronics will offset losses from the drop in Delta Electronics' long position.| Hon Hai vs. Novatek Microelectronics Corp | Hon Hai vs. MediaTek | Hon Hai vs. Quanta Computer | Hon Hai vs. United Microelectronics |
| Delta Electronics vs. Novatek Microelectronics Corp | Delta Electronics vs. MediaTek | Delta Electronics vs. Quanta Computer | Delta Electronics vs. United Microelectronics |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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