Correlation Between Hon Hai and Kings Town
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Kings Town 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 Kings Town 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 Kings Town Bank, you can compare the effects of market volatilities on Hon Hai and Kings Town 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 Kings Town. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Kings Town.
Diversification Opportunities for Hon Hai and Kings Town
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and Kings is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Kings Town Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kings Town Bank 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 Kings Town. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kings Town Bank has no effect on the direction of Hon Hai i.e., Hon Hai and Kings Town go up and down completely randomly.
Pair Corralation between Hon Hai and Kings Town
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Kings Town. In addition to that, Hon Hai is 1.15 times more volatile than Kings Town Bank. It trades about -0.18 of its total potential returns per unit of risk. Kings Town Bank is currently generating about -0.05 per unit of volatility. If you would invest 4,945 in Kings Town Bank on September 1, 2024 and sell it today you would lose (105.00) from holding Kings Town Bank or give up 2.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Kings Town Bank
Performance |
| Timeline |
| Hon Hai Precision |
| Kings Town Bank |
Hon Hai and Kings Town Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Kings Town
The main advantage of trading using opposite Hon Hai and Kings Town positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Kings Town 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 Kings Town will offset losses from the drop in Kings Town's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Kings Town vs. Taichung Commercial Bank | Kings Town vs. Far Eastern International | Kings Town vs. Taiwan Business Bank | Kings Town vs. Sinopac Financial Holdings |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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