Correlation Between Hon Hai and Man Wah

Can any of the company-specific risk be diversified away by investing in both Hon Hai and Man Wah 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 Man Wah 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 Man Wah Holdings, you can compare the effects of market volatilities on Hon Hai and Man Wah 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 Man Wah. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Man Wah.

Diversification Opportunities for Hon Hai and Man Wah

-0.6

Correlation Coefficient

Hon Hai  Man Wah

Excellent diversification

The 3 months correlation between Hon and Man is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Man Wah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Man Wah Holdings 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 Man Wah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Man Wah Holdings has no effect on the direction of Hon Hai i.e., Hon Hai and Man Wah go up and down completely randomly.

Pair Corralation between Hon Hai and Man Wah

If you would invest  27.00  in Man Wah Holdings on October 15, 2024 and sell it today you would earn a total of  28.00  from holding Man Wah Holdings or generate 103.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

Hon Hai Precision  vs.  Man Wah Holdings

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 weak 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.

Man Wah Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Man Wah Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Man Wah reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hon Hai and Man Wah

The main advantage of trading using opposite Hon Hai and Man Wah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Man Wah 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 Man Wah will offset losses from the drop in Man Wah's long position.

The idea behind Hon Hai Precision and Man Wah Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.