Correlation Between Hon Hai and Taiwan Speciality
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Taiwan Speciality 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 Taiwan Speciality 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 Taiwan Speciality Chemicals, you can compare the effects of market volatilities on Hon Hai and Taiwan Speciality 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 Taiwan Speciality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Taiwan Speciality.
Diversification Opportunities for Hon Hai and Taiwan Speciality
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hon and Taiwan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Taiwan Speciality Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Speciality 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 Taiwan Speciality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Speciality has no effect on the direction of Hon Hai i.e., Hon Hai and Taiwan Speciality go up and down completely randomly.
Pair Corralation between Hon Hai and Taiwan Speciality
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Taiwan Speciality. In addition to that, Hon Hai is 1.36 times more volatile than Taiwan Speciality Chemicals. It trades about -0.14 of its total potential returns per unit of risk. Taiwan Speciality Chemicals is currently generating about -0.14 per unit of volatility. If you would invest 16,900 in Taiwan Speciality Chemicals on August 30, 2024 and sell it today you would lose (750.00) from holding Taiwan Speciality Chemicals or give up 4.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Taiwan Speciality Chemicals
Performance |
| Timeline |
| Hon Hai Precision |
| Taiwan Speciality |
Hon Hai and Taiwan Speciality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Taiwan Speciality
The main advantage of trading using opposite Hon Hai and Taiwan Speciality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Taiwan Speciality 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 Taiwan Speciality will offset losses from the drop in Taiwan Speciality's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Taiwan Speciality vs. Taiwan Semiconductor Manufacturing | Taiwan Speciality vs. Hon Hai Precision | Taiwan Speciality vs. MediaTek | Taiwan Speciality 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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