Correlation Between Hon Hai and Commerzbank
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Commerzbank 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 Commerzbank 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 Commerzbank AG, you can compare the effects of market volatilities on Hon Hai and Commerzbank 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 Commerzbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Commerzbank.
Diversification Opportunities for Hon Hai and Commerzbank
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and Commerzbank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Commerzbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG 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 Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG has no effect on the direction of Hon Hai i.e., Hon Hai and Commerzbank go up and down completely randomly.
Pair Corralation between Hon Hai and Commerzbank
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.6 times more return on investment than Commerzbank. However, Hon Hai is 1.6 times more volatile than Commerzbank AG. It trades about 0.06 of its potential returns per unit of risk. Commerzbank AG is currently generating about -0.01 per unit of risk. If you would invest 954.00 in Hon Hai Precision on August 29, 2024 and sell it today you would earn a total of 196.00 from holding Hon Hai Precision or generate 20.55% 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. Commerzbank AG
Performance |
| Timeline |
| Hon Hai Precision |
| Commerzbank AG |
Hon Hai and Commerzbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Commerzbank
The main advantage of trading using opposite Hon Hai and Commerzbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Commerzbank 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 Commerzbank will offset losses from the drop in Commerzbank's long position.The idea behind Hon Hai Precision and Commerzbank AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Commerzbank vs. Dairy Farm International | Commerzbank vs. HF FOODS GRP | Commerzbank vs. IMAGIN MEDICAL INC | Commerzbank vs. Apollo Medical Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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