Correlation Between ITM Power and Hon Hai
Can any of the company-specific risk be diversified away by investing in both ITM Power and Hon Hai 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 ITM Power and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITM Power Plc and Hon Hai Precision, you can compare the effects of market volatilities on ITM Power and Hon Hai 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 ITM Power with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITM Power and Hon Hai.
Diversification Opportunities for ITM Power and Hon Hai
Significant diversification
The 3 months correlation between ITM and Hon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ITM Power Plc and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision and ITM Power 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 ITM Power Plc are associated (or correlated) with Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of ITM Power i.e., ITM Power and Hon Hai go up and down completely randomly.
Pair Corralation between ITM Power and Hon Hai
Assuming the 90 days horizon ITM Power Plc is expected to under-perform the Hon Hai. But the stock apears to be less risky and, when comparing its historical volatility, ITM Power Plc is 1.01 times less risky than Hon Hai. The stock trades about -0.15 of its potential returns per unit of risk. The Hon Hai Precision is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 970.00 in Hon Hai Precision on November 27, 2024 and sell it today you would earn a total of 70.00 from holding Hon Hai Precision or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITM Power Plc vs. Hon Hai Precision
Performance |
| Timeline |
| ITM Power Plc |
| Hon Hai Precision |
ITM Power and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITM Power and Hon Hai
The main advantage of trading using opposite ITM Power and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITM Power position performs unexpectedly, Hon Hai 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 Hon Hai will offset losses from the drop in Hon Hai's long position.| ITM Power vs. Nel ASA | ITM Power vs. Powercell Sweden | ITM Power vs. Ballard Power Systems | ITM Power vs. Plug Power |
| Hon Hai vs. United Natural Foods | Hon Hai vs. PSI Software AG | Hon Hai vs. PATTIES FOODS | Hon Hai vs. BG Foods |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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