Correlation Between Hon Hai and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both Hon Hai and UMC 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 UMC 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 UMC Electronics Co, you can compare the effects of market volatilities on Hon Hai and UMC 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 UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and UMC Electronics.
Diversification Opportunities for Hon Hai and UMC Electronics
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hon and UMC is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC 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 UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of Hon Hai i.e., Hon Hai and UMC Electronics go up and down completely randomly.
Pair Corralation between Hon Hai and UMC Electronics
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.39 times more return on investment than UMC Electronics. However, Hon Hai is 1.39 times more volatile than UMC Electronics Co. It trades about -0.02 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.18 per unit of risk. If you would invest 1,210 in Hon Hai Precision on August 25, 2024 and sell it today you would lose (30.00) from holding Hon Hai Precision or give up 2.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. UMC Electronics Co
Performance |
| Timeline |
| Hon Hai Precision |
| UMC Electronics |
Hon Hai and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and UMC Electronics
The main advantage of trading using opposite Hon Hai and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, UMC 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 UMC Electronics will offset losses from the drop in UMC Electronics' long position.| Hon Hai vs. Hollywood Bowl Group | Hon Hai vs. HEMISPHERE EGY | Hon Hai vs. Universal Entertainment | Hon Hai vs. Singapore Telecommunications Limited |
| UMC Electronics vs. Amphenol | UMC Electronics vs. Hon Hai Precision | UMC Electronics vs. Samsung SDI Co | UMC Electronics vs. Murata Manufacturing 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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