Correlation Between Hon Hai and Nanya Technology
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Nanya Technology 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 Nanya Technology 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 Nanya Technology Corp, you can compare the effects of market volatilities on Hon Hai and Nanya Technology 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 Nanya Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Nanya Technology.
Diversification Opportunities for Hon Hai and Nanya Technology
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and Nanya is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Nanya Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanya Technology Corp 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 Nanya Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanya Technology Corp has no effect on the direction of Hon Hai i.e., Hon Hai and Nanya Technology go up and down completely randomly.
Pair Corralation between Hon Hai and Nanya Technology
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.97 times more return on investment than Nanya Technology. However, Hon Hai Precision is 1.03 times less risky than Nanya Technology. It trades about -0.18 of its potential returns per unit of risk. Nanya Technology Corp is currently generating about -0.54 per unit of risk. If you would invest 21,150 in Hon Hai Precision on September 1, 2024 and sell it today you would lose (1,600) from holding Hon Hai Precision or give up 7.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Nanya Technology Corp
Performance |
| Timeline |
| Hon Hai Precision |
| Nanya Technology Corp |
Hon Hai and Nanya Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Nanya Technology
The main advantage of trading using opposite Hon Hai and Nanya Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Nanya Technology 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 Nanya Technology will offset losses from the drop in Nanya Technology's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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