Correlation Between Hon Hai and Shell Plc
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Shell Plc 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 Shell Plc 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 Shell plc, you can compare the effects of market volatilities on Hon Hai and Shell Plc 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 Shell Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Shell Plc.
Diversification Opportunities for Hon Hai and Shell Plc
Good diversification
The 3 months correlation between Hon and Shell is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Shell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell 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 Shell Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell plc has no effect on the direction of Hon Hai i.e., Hon Hai and Shell Plc go up and down completely randomly.
Pair Corralation between Hon Hai and Shell Plc
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.67 times more return on investment than Shell Plc. However, Hon Hai is 1.67 times more volatile than Shell plc. It trades about 0.08 of its potential returns per unit of risk. Shell plc is currently generating about 0.02 per unit of risk. If you would invest 608.00 in Hon Hai Precision on August 30, 2024 and sell it today you would earn a total of 596.00 from holding Hon Hai Precision or generate 98.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Hon Hai Precision vs. Shell plc
Performance |
| Timeline |
| Hon Hai Precision |
| Shell plc |
Hon Hai and Shell Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Shell Plc
The main advantage of trading using opposite Hon Hai and Shell Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Shell Plc 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 Shell Plc will offset losses from the drop in Shell Plc's long position.| Hon Hai vs. Zoom Video Communications | Hon Hai vs. Adriatic Metals | Hon Hai vs. Silvercorp Metals | Hon Hai vs. Gear4music Plc |
| Shell Plc vs. Lendinvest PLC | Shell Plc vs. Neometals | Shell Plc vs. Coor Service Management | Shell Plc vs. Albion Technology General |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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