Correlation Between Hon Hai and Chailease Holding

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

Diversification Opportunities for Hon Hai and Chailease Holding

0.81

Correlation Coefficient

Hon Hai  Chailease Holding

Very poor diversification

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

Pair Corralation between Hon Hai and Chailease Holding

Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.07 times more return on investment than Chailease Holding. However, Hon Hai is 1.07 times more volatile than Chailease Holding Co. It trades about 0.08 of its potential returns per unit of risk. Chailease Holding Co is currently generating about -0.07 per unit of risk. If you would invest  9,358  in Hon Hai Precision on October 13, 2024 and sell it today you would earn a total of  8,792  from holding Hon Hai Precision or generate 93.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Hon Hai Precision  vs.  Chailease Holding Co

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 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.

Chailease Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chailease Holding Co 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.

Pair Trading with Hon Hai and Chailease Holding

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

The idea behind Hon Hai Precision and Chailease Holding Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.