Correlation Between Hon Hai and London Security
Can any of the company-specific risk be diversified away by investing in both Hon Hai and London Security 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 London Security 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 London Security Plc, you can compare the effects of market volatilities on Hon Hai and London Security 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 London Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and London Security.
Diversification Opportunities for Hon Hai and London Security
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hon and London is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and London Security Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Security Plc 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 London Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Security Plc has no effect on the direction of Hon Hai i.e., Hon Hai and London Security go up and down completely randomly.
Pair Corralation between Hon Hai and London Security
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.42 times more return on investment than London Security. However, Hon Hai is 1.42 times more volatile than London Security Plc. It trades about 0.08 of its potential returns per unit of risk. London Security Plc is currently generating about 0.03 per unit of risk. If you would invest 601.00 in Hon Hai Precision on August 31, 2024 and sell it today you would earn a total of 589.00 from holding Hon Hai Precision or generate 98.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Hon Hai Precision vs. London Security Plc
Performance |
| Timeline |
| Hon Hai Precision |
| London Security Plc |
Hon Hai and London Security Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and London Security
The main advantage of trading using opposite Hon Hai and London Security positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, London Security 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 London Security will offset losses from the drop in London Security's long position.| Hon Hai vs. McEwen Mining | Hon Hai vs. DFS Furniture PLC | Hon Hai vs. Beazer Homes USA | Hon Hai vs. Home Depot |
| London Security vs. Scandinavian Tobacco Group | London Security vs. Cars Inc | London Security vs. Dalata Hotel Group | London Security vs. Ecofin Global Utilities |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |