Correlation Between Benchmark Electronics and Hon Hai

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

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

Diversification Opportunities for Benchmark Electronics and Hon Hai

0.01

Correlation Coefficient

Benchmark Electronics  Hon Hai

Significant diversification

The 3 months correlation between Benchmark and Hon is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and Hon Hai go up and down completely randomly.

Pair Corralation between Benchmark Electronics and Hon Hai

Considering the 90-day investment horizon Benchmark Electronics is expected to generate 0.78 times more return on investment than Hon Hai. However, Benchmark Electronics is 1.28 times less risky than Hon Hai. It trades about -0.21 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.17 per unit of risk. If you would invest  4,815  in Benchmark Electronics on October 14, 2024 and sell it today you would lose (277.00) from holding Benchmark Electronics or give up 5.75% of portfolio value over 90 days.

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

Benchmark Electronics  vs.  Hon Hai Precision

Benchmark Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Benchmark Electronics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Hon Hai Precision

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Benchmark Electronics and Hon Hai

The main advantage of trading using opposite Benchmark Electronics and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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 Benchmark Electronics 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.