Correlation Between Hon Hai and Taiwan Weighted
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Taiwan Weighted 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 Taiwan Weighted 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 Taiwan Weighted, you can compare the effects of market volatilities on Hon Hai and Taiwan Weighted 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 Taiwan Weighted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Taiwan Weighted.
Diversification Opportunities for Hon Hai and Taiwan Weighted
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hon and Taiwan is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Taiwan Weighted in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Weighted 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 Taiwan Weighted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Weighted has no effect on the direction of Hon Hai i.e., Hon Hai and Taiwan Weighted go up and down completely randomly.
Pair Corralation between Hon Hai and Taiwan Weighted
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 2.01 times more return on investment than Taiwan Weighted. However, Hon Hai is 2.01 times more volatile than Taiwan Weighted. It trades about 0.07 of its potential returns per unit of risk. Taiwan Weighted is currently generating about 0.02 per unit of risk. If you would invest 18,750 in Hon Hai Precision on August 30, 2024 and sell it today you would earn a total of 900.00 from holding Hon Hai Precision or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 93.02% |
| Values | Daily Returns |
Hon Hai Precision vs. Taiwan Weighted
Performance |
| Timeline |
Hon Hai and Taiwan Weighted Volatility Contrast
Predicted Return Density |
| Returns |
Hon Hai Precision
Pair trading matchups for Hon Hai
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Pair Trading with Hon Hai and Taiwan Weighted
The main advantage of trading using opposite Hon Hai and Taiwan Weighted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Taiwan Weighted 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 Taiwan Weighted will offset losses from the drop in Taiwan Weighted's long position.| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
| Taiwan Weighted vs. Energenesis Biomedical Co | Taiwan Weighted vs. Jia Jie Biomedical | Taiwan Weighted vs. Level Biotechnology | Taiwan Weighted vs. Medigen Biotechnology |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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