Correlation Between Hon Hai and Central Reinsurance
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Central Reinsurance 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 Central Reinsurance 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 Central Reinsurance Corp, you can compare the effects of market volatilities on Hon Hai and Central Reinsurance 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 Central Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Central Reinsurance.
Diversification Opportunities for Hon Hai and Central Reinsurance
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hon and Central is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Central Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Reinsurance Corp 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 Central Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Reinsurance Corp has no effect on the direction of Hon Hai i.e., Hon Hai and Central Reinsurance go up and down completely randomly.
Pair Corralation between Hon Hai and Central Reinsurance
Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Central Reinsurance. In addition to that, Hon Hai is 2.24 times more volatile than Central Reinsurance Corp. It trades about -0.51 of its total potential returns per unit of risk. Central Reinsurance Corp is currently generating about -0.23 per unit of volatility. If you would invest 2,640 in Central Reinsurance Corp on September 24, 2024 and sell it today you would lose (80.00) from holding Central Reinsurance Corp or give up 3.03% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Hon Hai Precision vs. Central Reinsurance Corp
Performance |
Timeline |
Hon Hai Precision |
Central Reinsurance Corp |
Hon Hai and Central Reinsurance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hon Hai and Central Reinsurance
The main advantage of trading using opposite Hon Hai and Central Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Central Reinsurance 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 Central Reinsurance will offset losses from the drop in Central Reinsurance's long position.Hon Hai vs. Century Wind Power | Hon Hai vs. Green World Fintech | Hon Hai vs. Ingentec | Hon Hai vs. Chaheng Precision Co |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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