Correlation Between Hon Hai and Hotel Holiday
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Hotel Holiday 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 Hotel Holiday 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 Hotel Holiday Garden, you can compare the effects of market volatilities on Hon Hai and Hotel Holiday 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 Hotel Holiday. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Hotel Holiday.
Diversification Opportunities for Hon Hai and Hotel Holiday
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hon and Hotel is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Hotel Holiday Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Holiday Garden 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 Hotel Holiday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Holiday Garden has no effect on the direction of Hon Hai i.e., Hon Hai and Hotel Holiday go up and down completely randomly.
Pair Corralation between Hon Hai and Hotel Holiday
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Hotel Holiday. In addition to that, Hon Hai is 1.01 times more volatile than Hotel Holiday Garden. It trades about -0.08 of its total potential returns per unit of risk. Hotel Holiday Garden is currently generating about 0.12 per unit of volatility. If you would invest 1,635 in Hotel Holiday Garden on October 26, 2024 and sell it today you would earn a total of 75.00 from holding Hotel Holiday Garden or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Hotel Holiday Garden
Performance |
| Timeline |
| Hon Hai Precision |
| Hotel Holiday Garden |
Hon Hai and Hotel Holiday Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Hotel Holiday
The main advantage of trading using opposite Hon Hai and Hotel Holiday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Hotel Holiday 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 Hotel Holiday will offset losses from the drop in Hotel Holiday's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Hotel Holiday vs. Tong Yang Industry | Hotel Holiday vs. Ta Yih Industrial | Hotel Holiday vs. Basso Industry Corp | Hotel Holiday vs. China Motor 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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