Correlation Between Hon Hai and Loop Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Loop Telecommunicatio 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 Loop Telecommunicatio 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 Loop Telecommunication International, you can compare the effects of market volatilities on Hon Hai and Loop Telecommunicatio 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 Loop Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Loop Telecommunicatio.
Diversification Opportunities for Hon Hai and Loop Telecommunicatio
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hon and Loop is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Loop Telecommunication Interna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loop Telecommunication 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 Loop Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loop Telecommunication has no effect on the direction of Hon Hai i.e., Hon Hai and Loop Telecommunicatio go up and down completely randomly.
Pair Corralation between Hon Hai and Loop Telecommunicatio
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Loop Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.37 times less risky than Loop Telecommunicatio. The stock trades about -0.18 of its potential returns per unit of risk. The Loop Telecommunication International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,290 in Loop Telecommunication International on September 1, 2024 and sell it today you would earn a total of 200.00 from holding Loop Telecommunication International or generate 2.74% 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. Loop Telecommunication Interna
Performance |
| Timeline |
| Hon Hai Precision |
| Loop Telecommunication |
Hon Hai and Loop Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Loop Telecommunicatio
The main advantage of trading using opposite Hon Hai and Loop Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Loop Telecommunicatio 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 Loop Telecommunicatio will offset losses from the drop in Loop Telecommunicatio's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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