Correlation Between Hon Hai and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Fubon Financial 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 Fubon Financial 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 Fubon Financial Holding, you can compare the effects of market volatilities on Hon Hai and Fubon Financial 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 Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Fubon Financial.
Diversification Opportunities for Hon Hai and Fubon Financial
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and Fubon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Fubon Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Financial Holding 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 Fubon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Financial Holding has no effect on the direction of Hon Hai i.e., Hon Hai and Fubon Financial go up and down completely randomly.
Pair Corralation between Hon Hai and Fubon Financial
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.65 times more return on investment than Fubon Financial. However, Hon Hai is 1.65 times more volatile than Fubon Financial Holding. It trades about 0.09 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.08 per unit of risk. If you would invest 10,207 in Hon Hai Precision on August 31, 2024 and sell it today you would earn a total of 9,343 from holding Hon Hai Precision or generate 91.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Fubon Financial Holding
Performance |
| Timeline |
| Hon Hai Precision |
| Fubon Financial Holding |
Hon Hai and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Fubon Financial
The main advantage of trading using opposite Hon Hai and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Fubon Financial 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 Fubon Financial will offset losses from the drop in Fubon Financial's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Fubon Financial vs. Chia Yi Steel | Fubon Financial vs. Ever Clear Environmental Eng | Fubon Financial vs. Energenesis Biomedical Co | Fubon Financial vs. Song Ho Industrial |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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