Correlation Between AU Optronics and Hon Hai
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Hon Hai 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 AU Optronics and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Hon Hai Precision, you can compare the effects of market volatilities on AU Optronics and Hon Hai 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 AU Optronics with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Hon Hai.
Diversification Opportunities for AU Optronics and Hon Hai
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between 2409 and Hon is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision and AU Optronics 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 AU Optronics are associated (or correlated) with Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of AU Optronics i.e., AU Optronics and Hon Hai go up and down completely randomly.
Pair Corralation between AU Optronics and Hon Hai
Assuming the 90 days trading horizon AU Optronics is expected to generate 9.99 times less return on investment than Hon Hai. But when comparing it to its historical volatility, AU Optronics is 1.01 times less risky than Hon Hai. It trades about 0.01 of its potential returns per unit of risk. Hon Hai Precision is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 10,064 in Hon Hai Precision on August 26, 2024 and sell it today you would earn a total of 10,236 from holding Hon Hai Precision or generate 101.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Hon Hai Precision
Performance |
| Timeline |
| AU Optronics |
| Hon Hai Precision |
AU Optronics and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Hon Hai
The main advantage of trading using opposite AU Optronics and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Hon Hai 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 Hon Hai will offset losses from the drop in Hon Hai's long position.| AU Optronics vs. Novatek Microelectronics Corp | AU Optronics vs. Quanta Computer | AU Optronics vs. United Microelectronics |
| Hon Hai vs. United Microelectronics | Hon Hai vs. MediaTek | Hon Hai vs. Chunghwa Telecom Co | Hon Hai vs. Delta Electronics |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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