Correlation Between Hon Hai and Heran
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Heran 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 Heran 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 Heran Co, you can compare the effects of market volatilities on Hon Hai and Heran 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 Heran. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Heran.
Diversification Opportunities for Hon Hai and Heran
Poor diversification
The 3 months correlation between Hon and Heran is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Heran Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heran 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 Heran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heran has no effect on the direction of Hon Hai i.e., Hon Hai and Heran go up and down completely randomly.
Pair Corralation between Hon Hai and Heran
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Heran. In addition to that, Hon Hai is 3.09 times more volatile than Heran Co. It trades about -0.01 of its total potential returns per unit of risk. Heran Co is currently generating about 0.03 per unit of volatility. If you would invest 10,017 in Heran Co on October 25, 2024 and sell it today you would earn a total of 233.00 from holding Heran Co or generate 2.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Hon Hai Precision vs. Heran Co
Performance |
| Timeline |
| Hon Hai Precision |
| Heran |
Hon Hai and Heran Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Heran
The main advantage of trading using opposite Hon Hai and Heran positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Heran 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 Heran will offset losses from the drop in Heran's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Heran vs. Chicony Power Technology | Heran vs. Coretronic | Heran vs. Merry Electronics Co | Heran vs. Sampo 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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