Correlation Between Chialin Precision and Hon Hai

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

Diversification Opportunities for Chialin Precision and Hon Hai

0.51

Correlation Coefficient

Chialin Precision  Hon Hai

Very weak diversification

The 3 months correlation between Chialin and Hon is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Chialin Precision Industrial 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 Chialin 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 Chialin Precision Industrial 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 Chialin Precision i.e., Chialin Precision and Hon Hai go up and down completely randomly.

Pair Corralation between Chialin Precision and Hon Hai

Assuming the 90 days trading horizon Chialin Precision Industrial is expected to generate 0.55 times more return on investment than Hon Hai. However, Chialin Precision Industrial is 1.83 times less risky than Hon Hai. It trades about -0.05 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.09 per unit of risk. If you would invest  9,250  in Chialin Precision Industrial on December 23, 2024 and sell it today you would lose (300.00) from holding Chialin Precision Industrial or give up 3.24% of portfolio value over 90 days.

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

Chialin Precision Industrial  vs.  Hon Hai Precision

Chialin Precision

Risk-Adjusted Performance

Very Weak

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

Hon Hai Precision

Risk-Adjusted Performance

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.

Pair Trading with Chialin Precision and Hon Hai

The main advantage of trading using opposite Chialin Precision and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chialin 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 Chialin Precision Industrial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.