Correlation Between Hon Hai and Gudeng Precision
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Gudeng Precision 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 Gudeng Precision 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 Gudeng Precision Industrial, you can compare the effects of market volatilities on Hon Hai and Gudeng Precision 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 Gudeng Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Gudeng Precision.
Diversification Opportunities for Hon Hai and Gudeng Precision
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hon and Gudeng is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Gudeng Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gudeng Precision Ind 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 Gudeng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gudeng Precision Ind has no effect on the direction of Hon Hai i.e., Hon Hai and Gudeng Precision go up and down completely randomly.
Pair Corralation between Hon Hai and Gudeng Precision
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.84 times more return on investment than Gudeng Precision. However, Hon Hai Precision is 1.19 times less risky than Gudeng Precision. It trades about 0.1 of its potential returns per unit of risk. Gudeng Precision Industrial is currently generating about 0.06 per unit of risk. If you would invest 10,500 in Hon Hai Precision on September 3, 2024 and sell it today you would earn a total of 9,100 from holding Hon Hai Precision or generate 86.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Gudeng Precision Industrial
Performance |
| Timeline |
| Hon Hai Precision |
| Gudeng Precision Ind |
Hon Hai and Gudeng Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Gudeng Precision
The main advantage of trading using opposite Hon Hai and Gudeng Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Gudeng Precision 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 Gudeng Precision will offset losses from the drop in Gudeng Precision's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Gudeng Precision vs. Taiwan Semiconductor Manufacturing | Gudeng Precision vs. Hon Hai Precision | Gudeng Precision vs. MediaTek | Gudeng Precision vs. Chunghwa Telecom Co |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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