Correlation Between Hon Hai and Highwealth Construction
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Highwealth Construction 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 Highwealth Construction 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 Highwealth Construction Corp, you can compare the effects of market volatilities on Hon Hai and Highwealth Construction 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 Highwealth Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Highwealth Construction.
Diversification Opportunities for Hon Hai and Highwealth Construction
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hon and Highwealth is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Highwealth Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwealth Construction 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 Highwealth Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwealth Construction has no effect on the direction of Hon Hai i.e., Hon Hai and Highwealth Construction go up and down completely randomly.
Pair Corralation between Hon Hai and Highwealth Construction
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.89 times more return on investment than Highwealth Construction. However, Hon Hai is 1.89 times more volatile than Highwealth Construction Corp. It trades about 0.22 of its potential returns per unit of risk. Highwealth Construction Corp is currently generating about 0.24 per unit of risk. If you would invest 16,550 in Hon Hai Precision on November 28, 2024 and sell it today you would earn a total of 1,200 from holding Hon Hai Precision or generate 7.25% 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. Highwealth Construction Corp
Performance |
| Timeline |
| Hon Hai Precision |
| Highwealth Construction |
Hon Hai and Highwealth Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Highwealth Construction
The main advantage of trading using opposite Hon Hai and Highwealth Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Highwealth Construction 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 Highwealth Construction will offset losses from the drop in Highwealth Construction's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Highwealth Construction vs. Huaku Development Co | Highwealth Construction vs. Farglory Land Development | Highwealth Construction vs. Ruentex Development Co | Highwealth Construction vs. Ruentex Industries |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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