Correlation Between Hon Hai and Meiloon Industrial
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Meiloon Industrial 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 Meiloon Industrial 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 Meiloon Industrial Co, you can compare the effects of market volatilities on Hon Hai and Meiloon Industrial 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 Meiloon Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Meiloon Industrial.
Diversification Opportunities for Hon Hai and Meiloon Industrial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and Meiloon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Meiloon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiloon Industrial 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 Meiloon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiloon Industrial has no effect on the direction of Hon Hai i.e., Hon Hai and Meiloon Industrial go up and down completely randomly.
Pair Corralation between Hon Hai and Meiloon Industrial
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.84 times more return on investment than Meiloon Industrial. However, Hon Hai Precision is 1.19 times less risky than Meiloon Industrial. It trades about 0.09 of its potential returns per unit of risk. Meiloon Industrial Co is currently generating about 0.05 per unit of risk. If you would invest 9,730 in Hon Hai Precision on August 30, 2024 and sell it today you would earn a total of 9,920 from holding Hon Hai Precision or generate 101.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Meiloon Industrial Co
Performance |
| Timeline |
| Hon Hai Precision |
| Meiloon Industrial |
Hon Hai and Meiloon Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Meiloon Industrial
The main advantage of trading using opposite Hon Hai and Meiloon Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Meiloon Industrial 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 Meiloon Industrial will offset losses from the drop in Meiloon Industrial's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Meiloon Industrial vs. Yulon Finance Corp | Meiloon Industrial vs. Taiwan Secom Co | Meiloon Industrial vs. Great Wall Enterprise |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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