Correlation Between Hon Hai and Barratt Developments
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Barratt Developments 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 Barratt Developments 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 Barratt Developments plc, you can compare the effects of market volatilities on Hon Hai and Barratt Developments 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 Barratt Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Barratt Developments.
Diversification Opportunities for Hon Hai and Barratt Developments
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and Barratt is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Barratt Developments plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barratt Developments plc 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 Barratt Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barratt Developments plc has no effect on the direction of Hon Hai i.e., Hon Hai and Barratt Developments go up and down completely randomly.
Pair Corralation between Hon Hai and Barratt Developments
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.94 times more return on investment than Barratt Developments. However, Hon Hai is 1.94 times more volatile than Barratt Developments plc. It trades about 0.12 of its potential returns per unit of risk. Barratt Developments plc is currently generating about -0.04 per unit of risk. If you would invest 560.00 in Hon Hai Precision on August 28, 2024 and sell it today you would earn a total of 640.00 from holding Hon Hai Precision or generate 114.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.53% |
| Values | Daily Returns |
Hon Hai Precision vs. Barratt Developments plc
Performance |
| Timeline |
| Hon Hai Precision |
| Barratt Developments plc |
Hon Hai and Barratt Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Barratt Developments
The main advantage of trading using opposite Hon Hai and Barratt Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Barratt Developments 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 Barratt Developments will offset losses from the drop in Barratt Developments' long position.| Hon Hai vs. Lion One Metals | Hon Hai vs. WisdomTree Investments | Hon Hai vs. Jacquet Metal Service | Hon Hai vs. REGAL ASIAN INVESTMENTS |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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