Correlation Between Hon Hai and Santos
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Santos 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 Santos 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 Santos, you can compare the effects of market volatilities on Hon Hai and Santos 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 Santos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Santos.
Diversification Opportunities for Hon Hai and Santos
Excellent diversification
The 3 months correlation between Hon and Santos is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of Hon Hai i.e., Hon Hai and Santos go up and down completely randomly.
Pair Corralation between Hon Hai and Santos
Assuming the 90 days horizon Hon Hai Precision is expected to under-perform the Santos. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.91 times less risky than Santos. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Santos is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 443.00 in Santos on August 30, 2024 and sell it today you would earn a total of 7.00 from holding Santos or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Santos
Performance |
| Timeline |
| Hon Hai Precision |
| Santos |
Hon Hai and Santos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Santos
The main advantage of trading using opposite Hon Hai and Santos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Santos 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 Santos will offset losses from the drop in Santos' long position.The idea behind Hon Hai Precision and Santos 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.| Santos vs. Permian Resources | Santos vs. Devon Energy | Santos vs. EOG Resources | Santos vs. Coterra Energy |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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