Correlation Between Hon Hai and VF
Can any of the company-specific risk be diversified away by investing in both Hon Hai and VF 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 VF 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 VF Corporation, you can compare the effects of market volatilities on Hon Hai and VF 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 VF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and VF.
Diversification Opportunities for Hon Hai and VF
Poor diversification
The 3 months correlation between Hon and VF is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and VF Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF 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 VF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corporation has no effect on the direction of Hon Hai i.e., Hon Hai and VF go up and down completely randomly.
Pair Corralation between Hon Hai and VF
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the VF. But the stock apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.12 times less risky than VF. The stock trades about -0.06 of its potential returns per unit of risk. The VF Corporation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,895 in VF Corporation on August 28, 2024 and sell it today you would earn a total of 8.00 from holding VF Corporation or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. VF Corp.
Performance |
| Timeline |
| Hon Hai Precision |
| VF Corporation |
Hon Hai and VF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and VF
The main advantage of trading using opposite Hon Hai and VF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, VF 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 VF will offset losses from the drop in VF's 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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