Correlation Between Hon Hai and CLST Holdings
Can any of the company-specific risk be diversified away by investing in both Hon Hai and CLST Holdings 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 CLST Holdings 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 CLST Holdings, you can compare the effects of market volatilities on Hon Hai and CLST Holdings 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 CLST Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and CLST Holdings.
Diversification Opportunities for Hon Hai and CLST Holdings
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hon and CLST is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and CLST Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLST Holdings 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 CLST Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLST Holdings has no effect on the direction of Hon Hai i.e., Hon Hai and CLST Holdings go up and down completely randomly.
Pair Corralation between Hon Hai and CLST Holdings
Assuming the 90 days horizon Hon Hai is expected to generate 24.8 times less return on investment than CLST Holdings. But when comparing it to its historical volatility, Hon Hai Precision is 15.83 times less risky than CLST Holdings. It trades about 0.08 of its potential returns per unit of risk. CLST Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3.73 in CLST Holdings on August 29, 2024 and sell it today you would lose (0.73) from holding CLST Holdings or give up 19.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 81.45% |
| Values | Daily Returns |
Hon Hai Precision vs. CLST Holdings
Performance |
| Timeline |
| Hon Hai Precision |
| CLST Holdings |
Hon Hai and CLST Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and CLST Holdings
The main advantage of trading using opposite Hon Hai and CLST Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, CLST Holdings 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 CLST Holdings will offset losses from the drop in CLST Holdings' long position.The idea behind Hon Hai Precision and CLST Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CLST Holdings vs. Radcom | CLST Holdings vs. Stratasys | CLST Holdings vs. MGIC Investment Corp | CLST Holdings vs. Cincinnati Financial |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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