Correlation Between Hon Hai and Prime Electronics
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Prime Electronics 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 Prime Electronics 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 Prime Electronics Satellitics, you can compare the effects of market volatilities on Hon Hai and Prime Electronics 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 Prime Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Prime Electronics.
Diversification Opportunities for Hon Hai and Prime Electronics
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hon and Prime is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Prime Electronics Satellitics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Electronics 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 Prime Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Electronics has no effect on the direction of Hon Hai i.e., Hon Hai and Prime Electronics go up and down completely randomly.
Pair Corralation between Hon Hai and Prime Electronics
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.78 times more return on investment than Prime Electronics. However, Hon Hai Precision is 1.29 times less risky than Prime Electronics. It trades about 0.08 of its potential returns per unit of risk. Prime Electronics Satellitics is currently generating about 0.03 per unit of risk. If you would invest 9,825 in Hon Hai Precision on November 27, 2024 and sell it today you would earn a total of 8,575 from holding Hon Hai Precision or generate 87.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Prime Electronics Satellitics
Performance |
| Timeline |
| Hon Hai Precision |
| Prime Electronics |
Hon Hai and Prime Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Prime Electronics
The main advantage of trading using opposite Hon Hai and Prime Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Prime Electronics 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 Prime Electronics will offset losses from the drop in Prime Electronics' 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 Stocks Directory module to find actively traded stocks across global markets.
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