Correlation Between Hon Hai and Ouster

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

Diversification Opportunities for Hon Hai and Ouster

0.6

Correlation Coefficient

Hon Hai  Ouster

Poor diversification

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

Pair Corralation between Hon Hai and Ouster

Assuming the 90 days horizon Hon Hai Precision is expected to generate 0.31 times more return on investment than Ouster. However, Hon Hai Precision is 3.21 times less risky than Ouster. It trades about 0.08 of its potential returns per unit of risk. Ouster Inc is currently generating about 0.02 per unit of risk. If you would invest  610.00  in Hon Hai Precision on September 3, 2024 and sell it today you would earn a total of  611.00  from holding Hon Hai Precision or generate 100.16% return on investment over 90 days.

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

Hon Hai Precision  vs.  Ouster Inc

Hon Hai Precision

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hon Hai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ouster Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ouster Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Ouster unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hon Hai and Ouster

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

The idea behind Hon Hai Precision and Ouster Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.