Correlation Between PLAY2CHILL and Hon Hai

Can any of the company-specific risk be diversified away by investing in both PLAY2CHILL 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 PLAY2CHILL and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PLAY2CHILL SA ZY and Hon Hai Precision, you can compare the effects of market volatilities on PLAY2CHILL 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 PLAY2CHILL with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAY2CHILL and Hon Hai.

Diversification Opportunities for PLAY2CHILL and Hon Hai

0.6

Correlation Coefficient

PLAY2CHILL  Hon Hai

Poor diversification

The 3 months correlation between PLAY2CHILL and Hon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PLAY2CHILL SA ZY 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 PLAY2CHILL 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 PLAY2CHILL SA ZY 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 PLAY2CHILL i.e., PLAY2CHILL and Hon Hai go up and down completely randomly.

Pair Corralation between PLAY2CHILL and Hon Hai

Assuming the 90 days horizon PLAY2CHILL SA ZY is expected to under-perform the Hon Hai. But the stock apears to be less risky and, when comparing its historical volatility, PLAY2CHILL SA ZY is 1.38 times less risky than Hon Hai. The stock trades about -0.13 of its potential returns per unit of risk. The Hon Hai Precision is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,040  in Hon Hai Precision on December 30, 2024 and sell it today you would lose (190.00) from holding Hon Hai Precision or give up 18.27% of portfolio value over 90 days.

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

PLAY2CHILL SA ZY  vs.  Hon Hai Precision

PLAY2CHILL SA ZY

Risk-Adjusted Performance

Very Weak

Over the last 90 days PLAY2CHILL SA ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PLAY2CHILL and Hon Hai

The main advantage of trading using opposite PLAY2CHILL and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAY2CHILL 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 PLAY2CHILL SA ZY 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.