Correlation Between Hon Hai and Innolux Corp
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Innolux Corp 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 Innolux Corp 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 Innolux Corp, you can compare the effects of market volatilities on Hon Hai and Innolux Corp 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 Innolux Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Innolux Corp.
Diversification Opportunities for Hon Hai and Innolux Corp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hon and Innolux is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Innolux Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innolux Corp 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 Innolux Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innolux Corp has no effect on the direction of Hon Hai i.e., Hon Hai and Innolux Corp go up and down completely randomly.
Pair Corralation between Hon Hai and Innolux Corp
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.94 times more return on investment than Innolux Corp. However, Hon Hai Precision is 1.06 times less risky than Innolux Corp. It trades about -0.1 of its potential returns per unit of risk. Innolux Corp is currently generating about -0.14 per unit of risk. If you would invest 18,100 in Hon Hai Precision on October 20, 2024 and sell it today you would lose (750.00) from holding Hon Hai Precision or give up 4.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Hon Hai Precision vs. Innolux Corp
Performance |
| Timeline |
| Hon Hai Precision |
| Innolux Corp |
Hon Hai and Innolux Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Innolux Corp
The main advantage of trading using opposite Hon Hai and Innolux Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Innolux Corp 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 Innolux Corp will offset losses from the drop in Innolux Corp's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Innolux Corp vs. AU Optronics | Innolux Corp vs. China Steel Corp | Innolux Corp vs. Hon Hai Precision | Innolux Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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