Correlation Between Hon Hai and TDK
Can any of the company-specific risk be diversified away by investing in both Hon Hai and TDK 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 TDK 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 TDK Corporation, you can compare the effects of market volatilities on Hon Hai and TDK 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 TDK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and TDK.
Diversification Opportunities for Hon Hai and TDK
Very good diversification
The 3 months correlation between Hon and TDK is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and TDK Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDK Corporation 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 TDK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDK Corporation has no effect on the direction of Hon Hai i.e., Hon Hai and TDK go up and down completely randomly.
Pair Corralation between Hon Hai and TDK
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.41 times more return on investment than TDK. However, Hon Hai is 1.41 times more volatile than TDK Corporation. It trades about 0.06 of its potential returns per unit of risk. TDK Corporation is currently generating about 0.06 per unit of risk. If you would invest 562.00 in Hon Hai Precision on September 2, 2024 and sell it today you would earn a total of 528.00 from holding Hon Hai Precision or generate 93.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. TDK Corp.
Performance |
| Timeline |
| Hon Hai Precision |
| TDK Corporation |
Hon Hai and TDK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and TDK
The main advantage of trading using opposite Hon Hai and TDK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, TDK 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 TDK will offset losses from the drop in TDK's long position.| Hon Hai vs. Playtech plc | Hon Hai vs. PARKEN Sport Entertainment | Hon Hai vs. Playa Hotels Resorts | Hon Hai vs. Cleanaway Waste Management |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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