Correlation Between Hon Hai and Kingstate Electronics
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Kingstate Electronics 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 Kingstate Electronics 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 Kingstate Electronics, you can compare the effects of market volatilities on Hon Hai and Kingstate Electronics 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 Kingstate Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Kingstate Electronics.
Diversification Opportunities for Hon Hai and Kingstate Electronics
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hon and Kingstate is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Kingstate Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstate Electronics 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 Kingstate Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstate Electronics has no effect on the direction of Hon Hai i.e., Hon Hai and Kingstate Electronics go up and down completely randomly.
Pair Corralation between Hon Hai and Kingstate Electronics
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.89 times more return on investment than Kingstate Electronics. However, Hon Hai Precision is 1.13 times less risky than Kingstate Electronics. It trades about -0.18 of its potential returns per unit of risk. Kingstate Electronics is currently generating about -0.3 per unit of risk. If you would invest 21,600 in Hon Hai Precision on August 24, 2024 and sell it today you would lose (1,350) from holding Hon Hai Precision or give up 6.25% 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. Kingstate Electronics
Performance |
| Timeline |
| Hon Hai Precision |
| Kingstate Electronics |
Hon Hai and Kingstate Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Kingstate Electronics
The main advantage of trading using opposite Hon Hai and Kingstate Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Kingstate Electronics 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 Kingstate Electronics will offset losses from the drop in Kingstate Electronics' long position.The idea behind Hon Hai Precision and Kingstate Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Kingstate Electronics vs. Hon Hai Precision | Kingstate Electronics vs. Delta Electronics | Kingstate Electronics vs. LARGAN Precision Co | Kingstate Electronics vs. E Ink 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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