Correlation Between Universal Entertainment and Hon Hai
Can any of the company-specific risk be diversified away by investing in both Universal Entertainment 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 Universal Entertainment and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Entertainment and Hon Hai Precision, you can compare the effects of market volatilities on Universal Entertainment 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 Universal Entertainment with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and Hon Hai.
Diversification Opportunities for Universal Entertainment and Hon Hai
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Hon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment i.e., Universal Entertainment and Hon Hai go up and down completely randomly.
Pair Corralation between Universal Entertainment and Hon Hai
Assuming the 90 days trading horizon Universal Entertainment is expected to generate 0.7 times more return on investment than Hon Hai. However, Universal Entertainment is 1.43 times less risky than Hon Hai. It trades about 0.13 of its potential returns per unit of risk. Hon Hai Precision is currently generating about 0.08 per unit of risk. If you would invest 595.00 in Universal Entertainment on October 25, 2024 and sell it today you would earn a total of 40.00 from holding Universal Entertainment or generate 6.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Entertainment vs. Hon Hai Precision
Performance |
| Timeline |
| Universal Entertainment |
| Hon Hai Precision |
Universal Entertainment and Hon Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Entertainment and Hon Hai
The main advantage of trading using opposite Universal Entertainment and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment 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.The idea behind Universal Entertainment and Hon Hai Precision 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.
| Hon Hai vs. Fuji Media Holdings | Hon Hai vs. ANTA SPORTS PRODUCT | Hon Hai vs. MGIC INVESTMENT | Hon Hai vs. Universal Entertainment |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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