Correlation Between Hon Hai and Aeon

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

Diversification Opportunities for Hon Hai and Aeon

-0.5

Correlation Coefficient

Hon Hai  Aeon

Very good diversification

The 3 months correlation between Hon and Aeon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Aeon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeon 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 Aeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeon has no effect on the direction of Hon Hai i.e., Hon Hai and Aeon go up and down completely randomly.

Pair Corralation between Hon Hai and Aeon

Assuming the 90 days horizon Hon Hai is expected to generate 60.86 times less return on investment than Aeon. But when comparing it to its historical volatility, Hon Hai Precision is 44.35 times less risky than Aeon. It trades about 0.07 of its potential returns per unit of risk. Aeon Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Aeon Co on October 5, 2024 and sell it today you would earn a total of  1,912  from holding Aeon Co or generate 1249.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	24.84%
Values	Daily Returns

Hon Hai Precision  vs.  Aeon Co

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.

Aeon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeon Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aeon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hon Hai and Aeon

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

The idea behind Hon Hai Precision and Aeon Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.