Correlation Between Hon Hai and SoftBank Group
Can any of the company-specific risk be diversified away by investing in both Hon Hai and SoftBank Group 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 SoftBank Group 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 SoftBank Group Corp, you can compare the effects of market volatilities on Hon Hai and SoftBank Group 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 SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and SoftBank Group.
Diversification Opportunities for Hon Hai and SoftBank Group
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hon and SoftBank is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp 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 SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of Hon Hai i.e., Hon Hai and SoftBank Group go up and down completely randomly.
Pair Corralation between Hon Hai and SoftBank Group
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.8 times more return on investment than SoftBank Group. However, Hon Hai Precision is 1.25 times less risky than SoftBank Group. It trades about 0.09 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.05 per unit of risk. If you would invest 585.00 in Hon Hai Precision on August 28, 2024 and sell it today you would earn a total of 675.00 from holding Hon Hai Precision or generate 115.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 82.88% |
| Values | Daily Returns |
Hon Hai Precision vs. SoftBank Group Corp
Performance |
| Timeline |
| Hon Hai Precision |
| SoftBank Group Corp |
Hon Hai and SoftBank Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and SoftBank Group
The main advantage of trading using opposite Hon Hai and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, SoftBank Group 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 SoftBank Group will offset losses from the drop in SoftBank Group's long position.| Hon Hai vs. AMG Advanced Metallurgical | Hon Hai vs. Panther Metals PLC | Hon Hai vs. PPHE Hotel Group | Hon Hai vs. Host Hotels Resorts |
| SoftBank Group vs. Litigation Capital Management | SoftBank Group vs. Bisichi Mining PLC | SoftBank Group vs. Impax Asset Management | SoftBank Group vs. Alfa Financial Software |
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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