Correlation Between Hon Hai and Chernan Metal
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Chernan Metal 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 Chernan Metal 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 Chernan Metal Industrial, you can compare the effects of market volatilities on Hon Hai and Chernan Metal 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 Chernan Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Chernan Metal.
Diversification Opportunities for Hon Hai and Chernan Metal
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hon and Chernan is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Chernan Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chernan Metal Industrial 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 Chernan Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chernan Metal Industrial has no effect on the direction of Hon Hai i.e., Hon Hai and Chernan Metal go up and down completely randomly.
Pair Corralation between Hon Hai and Chernan Metal
Assuming the 90 days trading horizon Hon Hai is expected to generate 1.6 times less return on investment than Chernan Metal. But when comparing it to its historical volatility, Hon Hai Precision is 1.55 times less risky than Chernan Metal. It trades about 0.27 of its potential returns per unit of risk. Chernan Metal Industrial is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,605 in Chernan Metal Industrial on November 29, 2024 and sell it today you would earn a total of 525.00 from holding Chernan Metal Industrial or generate 14.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Chernan Metal Industrial
Performance |
| Timeline |
| Hon Hai Precision |
| Chernan Metal Industrial |
Hon Hai and Chernan Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Chernan Metal
The main advantage of trading using opposite Hon Hai and Chernan Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Chernan Metal 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 Chernan Metal will offset losses from the drop in Chernan Metal's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Chernan Metal vs. Wholetech System Hitech | Chernan Metal vs. Etrend Hightech | Chernan Metal vs. Simplo Technology Co | Chernan Metal vs. China Times Publishing |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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