Correlation Between Taiwan Speciality and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Taiwan Speciality 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 Taiwan Speciality and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Speciality Chemicals and Hon Hai Precision, you can compare the effects of market volatilities on Taiwan Speciality 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 Taiwan Speciality with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Speciality and Hon Hai.
Diversification Opportunities for Taiwan Speciality and Hon Hai
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Taiwan and Hon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Speciality Chemicals 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 Taiwan Speciality 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 Taiwan Speciality Chemicals 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 Taiwan Speciality i.e., Taiwan Speciality and Hon Hai go up and down completely randomly.
Pair Corralation between Taiwan Speciality and Hon Hai
Assuming the 90 days trading horizon Taiwan Speciality is expected to generate 5.77 times less return on investment than Hon Hai. In addition to that, Taiwan Speciality is 2.39 times more volatile than Hon Hai Precision. It trades about 0.02 of its total potential returns per unit of risk. Hon Hai Precision is currently generating about 0.22 per unit of volatility. If you would invest 16,550 in Hon Hai Precision on November 28, 2024 and sell it today you would earn a total of 1,200 from holding Hon Hai Precision or generate 7.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Speciality Chemicals vs. Hon Hai Precision
Performance |
| Timeline |
| Taiwan Speciality |
| Hon Hai Precision |
Taiwan Speciality and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Speciality and Hon Hai
The main advantage of trading using opposite Taiwan Speciality and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Speciality 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.| Taiwan Speciality vs. Song Ho Industrial | Taiwan Speciality vs. Jia Jie Biomedical | Taiwan Speciality vs. Energenesis Biomedical Co | Taiwan Speciality vs. Easywell Biomedicals |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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