Correlation Between Hon Hai and Pou Chen
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Pou Chen 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 Pou Chen 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 Pou Chen Corp, you can compare the effects of market volatilities on Hon Hai and Pou Chen 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 Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Pou Chen.
Diversification Opportunities for Hon Hai and Pou Chen
Poor diversification
The 3 months correlation between Hon and Pou is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen 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 Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of Hon Hai i.e., Hon Hai and Pou Chen go up and down completely randomly.
Pair Corralation between Hon Hai and Pou Chen
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.38 times more return on investment than Pou Chen. However, Hon Hai is 1.38 times more volatile than Pou Chen Corp. It trades about 0.13 of its potential returns per unit of risk. Pou Chen Corp is currently generating about 0.1 per unit of risk. If you would invest 9,450 in Hon Hai Precision on August 25, 2024 and sell it today you would earn a total of 10,850 from holding Hon Hai Precision or generate 114.81% 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. Pou Chen Corp
Performance |
| Timeline |
| Hon Hai Precision |
| Pou Chen Corp |
Hon Hai and Pou Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Pou Chen
The main advantage of trading using opposite Hon Hai and Pou Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Pou Chen 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 Pou Chen will offset losses from the drop in Pou Chen's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Pou Chen vs. Taiwan Semiconductor Manufacturing | Pou Chen vs. Hon Hai Precision | Pou Chen vs. MediaTek | Pou Chen vs. Chunghwa Telecom 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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