Correlation Between Foxconn Technology and Cipherlab

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

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

Diversification Opportunities for Foxconn Technology and Cipherlab

-0.28

Correlation Coefficient

Foxconn Technology  Cipherlab

Very good diversification

The 3 months correlation between Foxconn and Cipherlab is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Foxconn Technology Co and Cipherlab Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cipherlab and Foxconn Technology 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 Foxconn Technology Co are associated (or correlated) with Cipherlab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cipherlab has no effect on the direction of Foxconn Technology i.e., Foxconn Technology and Cipherlab go up and down completely randomly.

Pair Corralation between Foxconn Technology and Cipherlab

Assuming the 90 days trading horizon Foxconn Technology Co is expected to under-perform the Cipherlab. In addition to that, Foxconn Technology is 1.37 times more volatile than Cipherlab Co. It trades about -0.16 of its total potential returns per unit of risk. Cipherlab Co is currently generating about -0.12 per unit of volatility. If you would invest  2,575  in Cipherlab Co on September 25, 2024 and sell it today you would lose (130.00) from holding Cipherlab Co or give up 5.05% of portfolio value over 90 days.

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

Foxconn Technology Co  vs.  Cipherlab Co

Foxconn Technology

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foxconn Technology Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Foxconn Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Cipherlab

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cipherlab Co 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 Foxconn Technology and Cipherlab

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

The idea behind Foxconn Technology Co and Cipherlab 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.