Correlation Between LARGAN Precision and Hon Hai

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

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

Diversification Opportunities for LARGAN Precision and Hon Hai

-0.74

Correlation Coefficient

LARGAN Precision  Hon Hai

Pay attention - limited upside

The 3 months correlation between LARGAN and Hon is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding LARGAN Precision Co and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision and LARGAN Precision 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 LARGAN Precision Co are associated (or correlated) with Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of LARGAN Precision i.e., LARGAN Precision and Hon Hai go up and down completely randomly.

Pair Corralation between LARGAN Precision and Hon Hai

Assuming the 90 days trading horizon LARGAN Precision Co is expected to under-perform the Hon Hai. In addition to that, LARGAN Precision is 1.21 times more volatile than Hon Hai Precision. It trades about -0.14 of its total potential returns per unit of risk. Hon Hai Precision is currently generating about 0.05 per unit of volatility. If you would invest  18,500  in Hon Hai Precision on September 3, 2024 and sell it today you would earn a total of  1,050  from holding Hon Hai Precision or generate 5.68% return on investment over 90 days.

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

LARGAN Precision Co  vs.  Hon Hai Precision

LARGAN Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LARGAN Precision Co 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hon Hai Precision

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hon Hai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with LARGAN Precision and Hon Hai

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

The idea behind LARGAN Precision Co and Hon Hai Precision 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.