Correlation Between Hon Hai and Giant Manufacturing
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Giant Manufacturing 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 Giant Manufacturing 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 Giant Manufacturing Co, you can compare the effects of market volatilities on Hon Hai and Giant Manufacturing 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 Giant Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Giant Manufacturing.
Diversification Opportunities for Hon Hai and Giant Manufacturing
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hon and Giant is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Giant Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Giant Manufacturing 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 Giant Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Giant Manufacturing has no effect on the direction of Hon Hai i.e., Hon Hai and Giant Manufacturing go up and down completely randomly.
Pair Corralation between Hon Hai and Giant Manufacturing
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.84 times more return on investment than Giant Manufacturing. However, Hon Hai Precision is 1.19 times less risky than Giant Manufacturing. It trades about 0.08 of its potential returns per unit of risk. Giant Manufacturing Co is currently generating about -0.29 per unit of risk. If you would invest 18,550 in Hon Hai Precision on August 28, 2024 and sell it today you would earn a total of 1,700 from holding Hon Hai Precision or generate 9.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Giant Manufacturing Co
Performance |
| Timeline |
| Hon Hai Precision |
| Giant Manufacturing |
Hon Hai and Giant Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Giant Manufacturing
The main advantage of trading using opposite Hon Hai and Giant Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Giant Manufacturing 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 Giant Manufacturing will offset losses from the drop in Giant Manufacturing's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Giant Manufacturing vs. Taiwan Semiconductor Manufacturing | Giant Manufacturing vs. Hon Hai Precision | Giant Manufacturing vs. MediaTek | Giant Manufacturing 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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