Correlation Between Hon Hai and Channel Well

Can any of the company-specific risk be diversified away by investing in both Hon Hai and Channel Well 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 Channel Well 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 Channel Well Technology, you can compare the effects of market volatilities on Hon Hai and Channel Well 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 Channel Well. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Channel Well.

Diversification Opportunities for Hon Hai and Channel Well

-0.81

Correlation Coefficient

Hon Hai  Channel Well

Pay attention - limited upside

The 3 months correlation between Hon and Channel is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Channel Well Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Channel Well Technology 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 Channel Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Channel Well Technology has no effect on the direction of Hon Hai i.e., Hon Hai and Channel Well go up and down completely randomly.

Pair Corralation between Hon Hai and Channel Well

Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Channel Well. But the stock apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.29 times less risky than Channel Well. The stock trades about -0.04 of its potential returns per unit of risk. The Channel Well Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,640  in Channel Well Technology on October 8, 2024 and sell it today you would earn a total of  630.00  from holding Channel Well Technology or generate 9.49% return on investment over 90 days.

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

Hon Hai Precision  vs.  Channel Well Technology

Hon Hai Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hon Hai Precision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hon Hai is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Channel Well Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Channel Well Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Channel Well may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hon Hai and Channel Well

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

The idea behind Hon Hai Precision and Channel Well 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.