Correlation Between Hon Hai and Chunghwa Precision
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Chunghwa Precision 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 Chunghwa Precision 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 Chunghwa Precision Test, you can compare the effects of market volatilities on Hon Hai and Chunghwa Precision 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 Chunghwa Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Chunghwa Precision.
Diversification Opportunities for Hon Hai and Chunghwa Precision
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hon and Chunghwa is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Chunghwa Precision Test in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Precision Test 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 Chunghwa Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Precision Test has no effect on the direction of Hon Hai i.e., Hon Hai and Chunghwa Precision go up and down completely randomly.
Pair Corralation between Hon Hai and Chunghwa Precision
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.71 times more return on investment than Chunghwa Precision. However, Hon Hai Precision is 1.41 times less risky than Chunghwa Precision. It trades about 0.4 of its potential returns per unit of risk. Chunghwa Precision Test is currently generating about 0.06 per unit of risk. If you would invest 16,550 in Hon Hai Precision on November 27, 2024 and sell it today you would earn a total of 1,850 from holding Hon Hai Precision or generate 11.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Chunghwa Precision Test
Performance |
| Timeline |
| Hon Hai Precision |
| Chunghwa Precision Test |
Hon Hai and Chunghwa Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Chunghwa Precision
The main advantage of trading using opposite Hon Hai and Chunghwa Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Chunghwa Precision 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 Chunghwa Precision will offset losses from the drop in Chunghwa Precision's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Chunghwa Precision vs. Chicony Electronics Co | Chunghwa Precision vs. Tait Marketing Distribution | Chunghwa Precision vs. China Mobile | Chunghwa Precision vs. Mobiletron Electronics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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