Correlation Between Hon Hai and Ricoh
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Ricoh 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 Ricoh 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 Ricoh Co, you can compare the effects of market volatilities on Hon Hai and Ricoh 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 Ricoh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Ricoh.
Diversification Opportunities for Hon Hai and Ricoh
Poor diversification
The 3 months correlation between Hon and Ricoh is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Ricoh Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ricoh 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 Ricoh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ricoh has no effect on the direction of Hon Hai i.e., Hon Hai and Ricoh go up and down completely randomly.
Pair Corralation between Hon Hai and Ricoh
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Ricoh. In addition to that, Hon Hai is 2.06 times more volatile than Ricoh Co. It trades about -0.19 of its total potential returns per unit of risk. Ricoh Co is currently generating about 0.01 per unit of volatility. If you would invest 164,350 in Ricoh Co on August 29, 2024 and sell it today you would earn a total of 350.00 from holding Ricoh Co or generate 0.21% 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. Ricoh Co
Performance |
| Timeline |
| Hon Hai Precision |
| Ricoh |
Hon Hai and Ricoh Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Ricoh
The main advantage of trading using opposite Hon Hai and Ricoh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Ricoh 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 Ricoh will offset losses from the drop in Ricoh'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 |
| Ricoh vs. Berkshire Hathaway | Ricoh vs. Hyundai Motor | Ricoh vs. Samsung Electronics Co | Ricoh vs. Samsung Electronics 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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