Correlation Between Hon Hai and Chialin Precision

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

Diversification Opportunities for Hon Hai and Chialin Precision

-0.85

Correlation Coefficient

Hon Hai  Chialin Precision

Pay attention - limited upside

The 3 months correlation between Hon and Chialin is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Chialin Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chialin Precision 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 Chialin Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chialin Precision has no effect on the direction of Hon Hai i.e., Hon Hai and Chialin Precision go up and down completely randomly.

Pair Corralation between Hon Hai and Chialin Precision

Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Chialin Precision. In addition to that, Hon Hai is 1.66 times more volatile than Chialin Precision Industrial. It trades about -0.18 of its total potential returns per unit of risk. Chialin Precision Industrial is currently generating about 0.07 per unit of volatility. If you would invest  9,250  in Chialin Precision Industrial on October 22, 2024 and sell it today you would earn a total of  130.00  from holding Chialin Precision Industrial or generate 1.41% 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.  Chialin Precision Industrial

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 abnormal 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.

Chialin Precision

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chialin Precision Industrial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chialin Precision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hon Hai and Chialin Precision

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

The idea behind Hon Hai Precision and Chialin Precision Industrial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.