Correlation Between Hon Hai and Capricorn Energy
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Capricorn Energy 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 Capricorn Energy 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 Capricorn Energy PLC, you can compare the effects of market volatilities on Hon Hai and Capricorn Energy 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 Capricorn Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Capricorn Energy.
Diversification Opportunities for Hon Hai and Capricorn Energy
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hon and Capricorn is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Capricorn Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Energy 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 Capricorn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Energy PLC has no effect on the direction of Hon Hai i.e., Hon Hai and Capricorn Energy go up and down completely randomly.
Pair Corralation between Hon Hai and Capricorn Energy
Assuming the 90 days horizon Hon Hai is expected to generate 2.19 times less return on investment than Capricorn Energy. But when comparing it to its historical volatility, Hon Hai Precision is 4.42 times less risky than Capricorn Energy. It trades about 0.08 of its potential returns per unit of risk. Capricorn Energy PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 612.00 in Capricorn Energy PLC on August 29, 2024 and sell it today you would lose (42.00) from holding Capricorn Energy PLC or give up 6.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 91.33% |
| Values | Daily Returns |
Hon Hai Precision vs. Capricorn Energy PLC
Performance |
| Timeline |
| Hon Hai Precision |
| Capricorn Energy PLC |
Hon Hai and Capricorn Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Capricorn Energy
The main advantage of trading using opposite Hon Hai and Capricorn Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Capricorn Energy 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 Capricorn Energy will offset losses from the drop in Capricorn Energy's long position.The idea behind Hon Hai Precision and Capricorn Energy PLC 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.| Capricorn Energy vs. San Leon Energy | Capricorn Energy vs. Tullow Oil PLC | Capricorn Energy vs. Dno ASA | Capricorn Energy vs. PetroShale |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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