Correlation Between Hon Hai and Dave Busters
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Dave Busters 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 Hon Hai and Dave Busters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hon Hai Precision and Dave Busters Entertainment, you can compare the effects of market volatilities on Hon Hai and Dave Busters 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 Hon Hai with a short position of Dave Busters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Dave Busters.
Diversification Opportunities for Hon Hai and Dave Busters
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and Dave is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Dave Busters Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Busters Enterta and Hon Hai 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 Hon Hai Precision are associated (or correlated) with Dave Busters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Busters Enterta has no effect on the direction of Hon Hai i.e., Hon Hai and Dave Busters go up and down completely randomly.
Pair Corralation between Hon Hai and Dave Busters
Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.97 times more return on investment than Dave Busters. However, Hon Hai Precision is 1.03 times less risky than Dave Busters. It trades about -0.05 of its potential returns per unit of risk. Dave Busters Entertainment is currently generating about -0.13 per unit of risk. If you would invest 1,050 in Hon Hai Precision on December 27, 2024 and sell it today you would lose (150.00) from holding Hon Hai Precision or give up 14.29% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Hon Hai Precision vs. Dave Busters Entertainment
Performance |
Timeline |
Hon Hai Precision |
Dave Busters Enterta |
Hon Hai and Dave Busters Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hon Hai and Dave Busters
The main advantage of trading using opposite Hon Hai and Dave Busters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Dave Busters 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 Dave Busters will offset losses from the drop in Dave Busters' long position.Hon Hai vs. BANK OF CHINA | Hon Hai vs. CHINA SOUTHN AIR H | Hon Hai vs. ALTAIR RES INC | Hon Hai vs. BANKINTER ADR 2007 |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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