Correlation Between Hon Hai and Capital Securities
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Capital Securities 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 Capital Securities 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 Capital Securities Corp, you can compare the effects of market volatilities on Hon Hai and Capital Securities 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 Capital Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Capital Securities.
Diversification Opportunities for Hon Hai and Capital Securities
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and Capital is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Capital Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Securities Corp 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 Capital Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Securities Corp has no effect on the direction of Hon Hai i.e., Hon Hai and Capital Securities go up and down completely randomly.
Pair Corralation between Hon Hai and Capital Securities
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.32 times more return on investment than Capital Securities. However, Hon Hai is 1.32 times more volatile than Capital Securities Corp. It trades about 0.1 of its potential returns per unit of risk. Capital Securities Corp is currently generating about 0.07 per unit of risk. If you would invest 10,800 in Hon Hai Precision on August 26, 2024 and sell it today you would earn a total of 9,500 from holding Hon Hai Precision or generate 87.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Capital Securities Corp
Performance |
| Timeline |
| Hon Hai Precision |
| Capital Securities Corp |
Hon Hai and Capital Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Capital Securities
The main advantage of trading using opposite Hon Hai and Capital Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Capital Securities 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 Capital Securities will offset losses from the drop in Capital Securities' long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Capital Securities vs. President Securities Corp | Capital Securities vs. Yuanta Financial Holdings | Capital Securities vs. Shin Kong Financial | Capital Securities vs. Taishin Financial Holding |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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