Correlation Between Hon Hai and E Lead
Can any of the company-specific risk be diversified away by investing in both Hon Hai and E Lead 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 E Lead 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 E Lead Electronic Co, you can compare the effects of market volatilities on Hon Hai and E Lead 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 E Lead. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and E Lead.
Diversification Opportunities for Hon Hai and E Lead
Almost no diversification
The 3 months correlation between Hon and 2497 is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and E Lead Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Lead Electronic 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 E Lead. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Lead Electronic has no effect on the direction of Hon Hai i.e., Hon Hai and E Lead go up and down completely randomly.
Pair Corralation between Hon Hai and E Lead
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.96 times more return on investment than E Lead. However, Hon Hai Precision is 1.05 times less risky than E Lead. It trades about -0.16 of its potential returns per unit of risk. E Lead Electronic Co is currently generating about -0.21 per unit of risk. If you would invest 21,500 in Hon Hai Precision on October 26, 2024 and sell it today you would lose (3,500) from holding Hon Hai Precision or give up 16.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. E Lead Electronic Co
Performance |
| Timeline |
| Hon Hai Precision |
| E Lead Electronic |
Hon Hai and E Lead Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and E Lead
The main advantage of trading using opposite Hon Hai and E Lead positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, E Lead 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 E Lead will offset losses from the drop in E Lead's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| E Lead vs. Weltrend Semiconductor | E Lead vs. Catcher Technology Co | E Lead vs. Cub Elecparts | E Lead 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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