Correlation Between Hon Hai and Kopin

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

Diversification Opportunities for Hon Hai and Kopin

0.08

Correlation Coefficient

Hon Hai  Kopin

Significant diversification

The 3 months correlation between Hon and Kopin is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Kopin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kopin 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 Kopin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kopin has no effect on the direction of Hon Hai i.e., Hon Hai and Kopin go up and down completely randomly.

Pair Corralation between Hon Hai and Kopin

Assuming the 90 days horizon Hon Hai Precision is expected to under-perform the Kopin. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 2.9 times less risky than Kopin. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Kopin is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Kopin on December 27, 2024 and sell it today you would lose (8.00) from holding Kopin or give up 5.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hon Hai Precision  vs.  Kopin

Hon Hai Precision

Risk-Adjusted Performance

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.

Kopin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kopin are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Kopin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hon Hai and Kopin

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

The idea behind Hon Hai Precision and Kopin 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.