Correlation Between Hon Hai and APEX International
Can any of the company-specific risk be diversified away by investing in both Hon Hai and APEX International 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 APEX International 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 APEX International Financial, you can compare the effects of market volatilities on Hon Hai and APEX International 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 APEX International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and APEX International.
Diversification Opportunities for Hon Hai and APEX International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and APEX is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and APEX International Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APEX International 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 APEX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APEX International has no effect on the direction of Hon Hai i.e., Hon Hai and APEX International go up and down completely randomly.
Pair Corralation between Hon Hai and APEX International
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the APEX International. But the stock apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.14 times less risky than APEX International. The stock trades about -0.24 of its potential returns per unit of risk. The APEX International Financial is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 3,210 in APEX International Financial on September 3, 2024 and sell it today you would lose (220.00) from holding APEX International Financial or give up 6.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. APEX International Financial
Performance |
| Timeline |
| Hon Hai Precision |
| APEX International |
Hon Hai and APEX International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and APEX International
The main advantage of trading using opposite Hon Hai and APEX International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, APEX International 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 APEX International will offset losses from the drop in APEX International's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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