Correlation Between Hon Hai and Synthomer Plc

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

Diversification Opportunities for Hon Hai and Synthomer Plc

-0.74

Correlation Coefficient

Hon Hai  Synthomer Plc

Pay attention - limited upside

The 3 months correlation between Hon and Synthomer is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Synthomer plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synthomer plc 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 Synthomer Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synthomer plc has no effect on the direction of Hon Hai i.e., Hon Hai and Synthomer Plc go up and down completely randomly.

Pair Corralation between Hon Hai and Synthomer Plc

Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.76 times more return on investment than Synthomer Plc. However, Hon Hai Precision is 1.31 times less risky than Synthomer Plc. It trades about 0.09 of its potential returns per unit of risk. Synthomer plc is currently generating about -0.16 per unit of risk. If you would invest  1,092  in Hon Hai Precision on September 5, 2024 and sell it today you would earn a total of  114.00  from holding Hon Hai Precision or generate 10.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Hon Hai Precision  vs.  Synthomer plc

Hon Hai Precision

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hon Hai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Synthomer plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Synthomer plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hon Hai and Synthomer Plc

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

The idea behind Hon Hai Precision and Synthomer plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.