Correlation Between Hon Hai and BYD Electronic
Can any of the company-specific risk be diversified away by investing in both Hon Hai and BYD Electronic 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 BYD Electronic 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 BYD Electronic, you can compare the effects of market volatilities on Hon Hai and BYD Electronic 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 BYD Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and BYD Electronic.
Diversification Opportunities for Hon Hai and BYD Electronic
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hon and BYD is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and BYD Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Electronic 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 BYD Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Electronic has no effect on the direction of Hon Hai i.e., Hon Hai and BYD Electronic go up and down completely randomly.
Pair Corralation between Hon Hai and BYD Electronic
Assuming the 90 days horizon Hon Hai Precision is expected to under-perform the BYD Electronic. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.82 times less risky than BYD Electronic. The pink sheet trades about -0.06 of its potential returns per unit of risk. The BYD Electronic is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 525.00 in BYD Electronic on November 3, 2024 and sell it today you would earn a total of 20.00 from holding BYD Electronic or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. BYD Electronic
Performance |
| Timeline |
| Hon Hai Precision |
| BYD Electronic |
Hon Hai and BYD Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and BYD Electronic
The main advantage of trading using opposite Hon Hai and BYD Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, BYD Electronic 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 BYD Electronic will offset losses from the drop in BYD Electronic's long position.| Hon Hai vs. AT S Austria | Hon Hai vs. alpha En | Hon Hai vs. Alps Electric Co | Hon Hai vs. Bitmine Immersion Technologies |
| BYD Electronic vs. Celestica | BYD Electronic vs. Flex | BYD Electronic vs. Fabrinet | BYD Electronic vs. Corning Incorporated |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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