Correlation Between Hon Hai and TaiMed Biologics
Can any of the company-specific risk be diversified away by investing in both Hon Hai and TaiMed Biologics 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 TaiMed Biologics 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 TaiMed Biologics, you can compare the effects of market volatilities on Hon Hai and TaiMed Biologics 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 TaiMed Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and TaiMed Biologics.
Diversification Opportunities for Hon Hai and TaiMed Biologics
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hon and TaiMed is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and TaiMed Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TaiMed Biologics 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 TaiMed Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TaiMed Biologics has no effect on the direction of Hon Hai i.e., Hon Hai and TaiMed Biologics go up and down completely randomly.
Pair Corralation between Hon Hai and TaiMed Biologics
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the TaiMed Biologics. But the stock apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.11 times less risky than TaiMed Biologics. The stock trades about -0.24 of its potential returns per unit of risk. The TaiMed Biologics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8,160 in TaiMed Biologics on September 3, 2024 and sell it today you would earn a total of 270.00 from holding TaiMed Biologics or generate 3.31% 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. TaiMed Biologics
Performance |
| Timeline |
| Hon Hai Precision |
| TaiMed Biologics |
Hon Hai and TaiMed Biologics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and TaiMed Biologics
The main advantage of trading using opposite Hon Hai and TaiMed Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, TaiMed Biologics 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 TaiMed Biologics will offset losses from the drop in TaiMed Biologics' long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| TaiMed Biologics vs. Sinphar Pharmaceutical Co | TaiMed Biologics vs. WiseChip Semiconductor | TaiMed Biologics vs. Novatek Microelectronics Corp | TaiMed Biologics vs. Leader 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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