Correlation Between Hon Hai and Richardson Electronics
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Richardson Electronics 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 Richardson Electronics 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 Richardson Electronics, you can compare the effects of market volatilities on Hon Hai and Richardson Electronics 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 Richardson Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Richardson Electronics.
Diversification Opportunities for Hon Hai and Richardson Electronics
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hon and Richardson is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Richardson Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richardson Electronics 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 Richardson Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richardson Electronics has no effect on the direction of Hon Hai i.e., Hon Hai and Richardson Electronics go up and down completely randomly.
Pair Corralation between Hon Hai and Richardson Electronics
Assuming the 90 days trading horizon Hon Hai is expected to generate 1.31 times less return on investment than Richardson Electronics. In addition to that, Hon Hai is 1.14 times more volatile than Richardson Electronics. It trades about 0.1 of its total potential returns per unit of risk. Richardson Electronics is currently generating about 0.15 per unit of volatility. If you would invest 1,055 in Richardson Electronics on August 25, 2024 and sell it today you would earn a total of 274.00 from holding Richardson Electronics or generate 25.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Richardson Electronics
Performance |
| Timeline |
| Hon Hai Precision |
| Richardson Electronics |
Hon Hai and Richardson Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Richardson Electronics
The main advantage of trading using opposite Hon Hai and Richardson Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Richardson Electronics 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 Richardson Electronics will offset losses from the drop in Richardson Electronics' long position.| Hon Hai vs. Chongqing Machinery Electric | Hon Hai vs. Richardson Electronics | Hon Hai vs. Arrow Electronics | Hon Hai vs. Meiko Electronics Co |
| Richardson Electronics vs. Amphenol | Richardson Electronics vs. Hon Hai Precision | Richardson Electronics vs. Samsung SDI Co | Richardson Electronics vs. Corning Incorporated |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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