Correlation Between Hon Hai and SCI Pharmtech
Can any of the company-specific risk be diversified away by investing in both Hon Hai and SCI Pharmtech 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 SCI Pharmtech 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 SCI Pharmtech, you can compare the effects of market volatilities on Hon Hai and SCI Pharmtech 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 SCI Pharmtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and SCI Pharmtech.
Diversification Opportunities for Hon Hai and SCI Pharmtech
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hon and SCI is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and SCI Pharmtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCI Pharmtech 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 SCI Pharmtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCI Pharmtech has no effect on the direction of Hon Hai i.e., Hon Hai and SCI Pharmtech go up and down completely randomly.
Pair Corralation between Hon Hai and SCI Pharmtech
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 2.82 times more return on investment than SCI Pharmtech. However, Hon Hai is 2.82 times more volatile than SCI Pharmtech. It trades about 0.13 of its potential returns per unit of risk. SCI Pharmtech is currently generating about -0.01 per unit of risk. If you would invest 10,150 in Hon Hai Precision on September 3, 2024 and sell it today you would earn a total of 9,400 from holding Hon Hai Precision or generate 92.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. SCI Pharmtech
Performance |
| Timeline |
| Hon Hai Precision |
| SCI Pharmtech |
Hon Hai and SCI Pharmtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and SCI Pharmtech
The main advantage of trading using opposite Hon Hai and SCI Pharmtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, SCI Pharmtech 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 SCI Pharmtech will offset losses from the drop in SCI Pharmtech's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| SCI Pharmtech vs. Grape King Bio | SCI Pharmtech vs. Standard Chemical Pharmaceutical | SCI Pharmtech vs. Adimmune Corp | SCI Pharmtech vs. ScinoPharm Taiwan |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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