Correlation Between Hon Hai and First Hotel
Can any of the company-specific risk be diversified away by investing in both Hon Hai and First Hotel 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 First Hotel 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 First Hotel Co, you can compare the effects of market volatilities on Hon Hai and First Hotel 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 First Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and First Hotel.
Diversification Opportunities for Hon Hai and First Hotel
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hon and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and First Hotel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Hotel 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 First Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Hotel has no effect on the direction of Hon Hai i.e., Hon Hai and First Hotel go up and down completely randomly.
Pair Corralation between Hon Hai and First Hotel
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.46 times more return on investment than First Hotel. However, Hon Hai is 1.46 times more volatile than First Hotel Co. It trades about 0.09 of its potential returns per unit of risk. First Hotel Co is currently generating about 0.01 per unit of risk. If you would invest 9,730 in Hon Hai Precision on August 28, 2024 and sell it today you would earn a total of 11,320 from holding Hon Hai Precision or generate 116.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. First Hotel Co
Performance |
| Timeline |
| Hon Hai Precision |
| First Hotel |
Hon Hai and First Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and First Hotel
The main advantage of trading using opposite Hon Hai and First Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, First Hotel 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 First Hotel will offset losses from the drop in First Hotel's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| First Hotel vs. Taiwan Semiconductor Manufacturing | First Hotel vs. Hon Hai Precision | First Hotel vs. MediaTek | First Hotel vs. Chunghwa Telecom Co |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |