Correlation Between Hong Ho and Etron Technology

Can any of the company-specific risk be diversified away by investing in both Hong Ho and Etron Technology 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 Hong Ho and Etron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Ho Precision and Etron Technology, you can compare the effects of market volatilities on Hong Ho and Etron Technology 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 Hong Ho with a short position of Etron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Ho and Etron Technology.

Diversification Opportunities for Hong Ho and Etron Technology

-0.48

Correlation Coefficient

Hong Ho  Etron Technology

Very good diversification

The 3 months correlation between Hong and Etron is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hong Ho Precision and Etron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etron Technology and Hong Ho 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 Hong Ho Precision are associated (or correlated) with Etron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etron Technology has no effect on the direction of Hong Ho i.e., Hong Ho and Etron Technology go up and down completely randomly.

Pair Corralation between Hong Ho and Etron Technology

Assuming the 90 days trading horizon Hong Ho Precision is expected to generate 1.46 times more return on investment than Etron Technology. However, Hong Ho is 1.46 times more volatile than Etron Technology. It trades about -0.03 of its potential returns per unit of risk. Etron Technology is currently generating about -0.1 per unit of risk. If you would invest  4,750  in Hong Ho Precision on October 7, 2024 and sell it today you would lose (860.00) from holding Hong Ho Precision or give up 18.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hong Ho Precision  vs.  Etron Technology

Hong Ho Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hong Ho Precision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Etron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Hong Ho and Etron Technology

The main advantage of trading using opposite Hong Ho and Etron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Ho position performs unexpectedly, Etron Technology 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 Etron Technology will offset losses from the drop in Etron Technology's long position.

The idea behind Hong Ho Precision and Etron Technology 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.