Correlation Between Hon Hai and Ruentex Industries
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Ruentex Industries 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 Ruentex Industries 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 Ruentex Industries, you can compare the effects of market volatilities on Hon Hai and Ruentex Industries 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 Ruentex Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Ruentex Industries.
Diversification Opportunities for Hon Hai and Ruentex Industries
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hon and Ruentex is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Ruentex Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Industries 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 Ruentex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Industries has no effect on the direction of Hon Hai i.e., Hon Hai and Ruentex Industries go up and down completely randomly.
Pair Corralation between Hon Hai and Ruentex Industries
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Ruentex Industries. In addition to that, Hon Hai is 1.59 times more volatile than Ruentex Industries. It trades about -0.21 of its total potential returns per unit of risk. Ruentex Industries is currently generating about -0.32 per unit of volatility. If you would invest 8,040 in Ruentex Industries on October 26, 2024 and sell it today you would lose (1,120) from holding Ruentex Industries or give up 13.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Ruentex Industries
Performance |
| Timeline |
| Hon Hai Precision |
| Ruentex Industries |
Hon Hai and Ruentex Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Ruentex Industries
The main advantage of trading using opposite Hon Hai and Ruentex Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Ruentex Industries 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 Ruentex Industries will offset losses from the drop in Ruentex Industries' long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Ruentex Industries vs. Ruentex Development Co | Ruentex Industries vs. Fubon Financial Holding | Ruentex Industries vs. Cathay Financial Holding | Ruentex Industries vs. Pou Chen 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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