Correlation Between Hon Hai and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Chung Hwa 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 Chung Hwa 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 Chung Hwa Food, you can compare the effects of market volatilities on Hon Hai and Chung Hwa 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 Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Chung Hwa.
Diversification Opportunities for Hon Hai and Chung Hwa
Pay attention - limited upside
The 3 months correlation between Hon and Chung is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Chung Hwa Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Food 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 Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Food has no effect on the direction of Hon Hai i.e., Hon Hai and Chung Hwa go up and down completely randomly.
Pair Corralation between Hon Hai and Chung Hwa
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 4.5 times more return on investment than Chung Hwa. However, Hon Hai is 4.5 times more volatile than Chung Hwa Food. It trades about 0.07 of its potential returns per unit of risk. Chung Hwa Food is currently generating about -0.14 per unit of risk. If you would invest 18,700 in Hon Hai Precision on September 3, 2024 and sell it today you would earn a total of 850.00 from holding Hon Hai Precision or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Chung Hwa Food
Performance |
| Timeline |
| Hon Hai Precision |
| Chung Hwa Food |
Hon Hai and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Chung Hwa
The main advantage of trading using opposite Hon Hai and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Chung Hwa vs. Uni President Enterprises Corp | Chung Hwa vs. Lien Hwa Industrial | Chung Hwa vs. Great Wall Enterprise | Chung Hwa vs. Standard Foods Corp |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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