Correlation Between Hon Hai and HNR Acquisition

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

Diversification Opportunities for Hon Hai and HNR Acquisition

0.8

Correlation Coefficient

Hon Hai  HNR Acquisition

Very poor diversification

The 3 months correlation between Hon and HNR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and HNR Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNR Acquisition Corp 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 HNR Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNR Acquisition Corp has no effect on the direction of Hon Hai i.e., Hon Hai and HNR Acquisition go up and down completely randomly.

Pair Corralation between Hon Hai and HNR Acquisition

Assuming the 90 days horizon Hon Hai Precision is expected to generate 0.2 times more return on investment than HNR Acquisition. However, Hon Hai Precision is 5.06 times less risky than HNR Acquisition. It trades about 0.07 of its potential returns per unit of risk. HNR Acquisition Corp is currently generating about -0.02 per unit of risk. If you would invest  601.00  in Hon Hai Precision on October 3, 2024 and sell it today you would earn a total of  511.00  from holding Hon Hai Precision or generate 85.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	76.97%
Values	Daily Returns

Hon Hai Precision  vs.  HNR Acquisition Corp

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 nearly stable basic indicators, Hon Hai is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HNR Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNR Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HNR Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hon Hai and HNR Acquisition

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

The idea behind Hon Hai Precision and HNR Acquisition Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.