Correlation Between Chongqing Machinery and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery 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 Chongqing Machinery and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chongqing Machinery Electric and Hon Hai Precision, you can compare the effects of market volatilities on Chongqing Machinery 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 Chongqing Machinery with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Hon Hai.
Diversification Opportunities for Chongqing Machinery and Hon Hai
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chongqing and Hon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric 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 Chongqing Machinery 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 Chongqing Machinery Electric 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 Chongqing Machinery i.e., Chongqing Machinery and Hon Hai go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Hon Hai
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 0.74 times more return on investment than Hon Hai. However, Chongqing Machinery Electric is 1.35 times less risky than Hon Hai. It trades about 0.04 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.02 per unit of risk. If you would invest 7.40 in Chongqing Machinery Electric on August 25, 2024 and sell it today you would earn a total of 0.10 from holding Chongqing Machinery Electric or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. Hon Hai Precision
Performance |
| Timeline |
| Chongqing Machinery |
| Hon Hai Precision |
Chongqing Machinery and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Hon Hai
The main advantage of trading using opposite Chongqing Machinery and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery 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.| Chongqing Machinery vs. Daito Trust Construction | Chongqing Machinery vs. KENEDIX OFFICE INV | Chongqing Machinery vs. RYU Apparel | Chongqing Machinery vs. Nufarm Limited |
| Hon Hai vs. Chongqing Machinery Electric | Hon Hai vs. Richardson Electronics | Hon Hai vs. Arrow Electronics | Hon Hai vs. Meiko Electronics 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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