Correlation Between Hon Hai and OMRON Corp
Can any of the company-specific risk be diversified away by investing in both Hon Hai and OMRON Corp 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 OMRON Corp 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 OMRON Corp ADR, you can compare the effects of market volatilities on Hon Hai and OMRON Corp 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 OMRON Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and OMRON Corp.
Diversification Opportunities for Hon Hai and OMRON Corp
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and OMRON is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and OMRON Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OMRON Corp ADR 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 OMRON Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OMRON Corp ADR has no effect on the direction of Hon Hai i.e., Hon Hai and OMRON Corp go up and down completely randomly.
Pair Corralation between Hon Hai and OMRON Corp
Assuming the 90 days horizon Hon Hai Precision is expected to generate 1.09 times more return on investment than OMRON Corp. However, Hon Hai is 1.09 times more volatile than OMRON Corp ADR. It trades about -0.08 of its potential returns per unit of risk. OMRON Corp ADR is currently generating about -0.09 per unit of risk. If you would invest 1,138 in Hon Hai Precision on October 26, 2024 and sell it today you would lose (40.00) from holding Hon Hai Precision or give up 3.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. OMRON Corp ADR
Performance |
| Timeline |
| Hon Hai Precision |
| OMRON Corp ADR |
Hon Hai and OMRON Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and OMRON Corp
The main advantage of trading using opposite Hon Hai and OMRON Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, OMRON Corp 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 OMRON Corp will offset losses from the drop in OMRON Corp'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 |
| OMRON Corp vs. Murata Manufacturing Co | OMRON Corp vs. LGL Group | OMRON Corp vs. Data IO | OMRON Corp vs. Bel Fuse A |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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