Correlation Between Hon Hai and Cathay Real
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Cathay Real 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 Cathay Real 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 Cathay Real Estate, you can compare the effects of market volatilities on Hon Hai and Cathay Real 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 Cathay Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Cathay Real.
Diversification Opportunities for Hon Hai and Cathay Real
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and Cathay is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Cathay Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Real Estate 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 Cathay Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Real Estate has no effect on the direction of Hon Hai i.e., Hon Hai and Cathay Real go up and down completely randomly.
Pair Corralation between Hon Hai and Cathay Real
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.86 times more return on investment than Cathay Real. However, Hon Hai Precision is 1.16 times less risky than Cathay Real. It trades about 0.13 of its potential returns per unit of risk. Cathay Real Estate is currently generating about 0.07 per unit of risk. If you would invest 10,650 in Hon Hai Precision on September 1, 2024 and sell it today you would earn a total of 8,900 from holding Hon Hai Precision or generate 83.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Cathay Real Estate
Performance |
| Timeline |
| Hon Hai Precision |
| Cathay Real Estate |
Hon Hai and Cathay Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Cathay Real
The main advantage of trading using opposite Hon Hai and Cathay Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Cathay Real 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 Cathay Real will offset losses from the drop in Cathay Real's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Cathay Real vs. Cathay Financial Holding | Cathay Real vs. Nan Ya Plastics | Cathay Real vs. Chang Hwa Commercial | Cathay Real vs. China Development Financial |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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