Correlation Between Farglory Life and Hon Hai

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

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

Diversification Opportunities for Farglory Life and Hon Hai

-0.54

Correlation Coefficient

Farglory Life  Hon Hai

Excellent diversification

The 3 months correlation between Farglory and Hon is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Farglory Life Insurance 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 Farglory Life 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 Farglory Life Insurance 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 Farglory Life i.e., Farglory Life and Hon Hai go up and down completely randomly.

Pair Corralation between Farglory Life and Hon Hai

Assuming the 90 days trading horizon Farglory Life Insurance is expected to generate 0.6 times more return on investment than Hon Hai. However, Farglory Life Insurance is 1.66 times less risky than Hon Hai. It trades about 0.09 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.14 per unit of risk. If you would invest  1,625  in Farglory Life Insurance on December 29, 2024 and sell it today you would earn a total of  110.00  from holding Farglory Life Insurance or generate 6.77% return on investment over 90 days.

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

Farglory Life Insurance  vs.  Hon Hai Precision

Farglory Life Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Life Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Farglory Life and Hon Hai

The main advantage of trading using opposite Farglory Life and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farglory Life 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 Farglory Life Insurance 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.