Correlation Between Hon Hai and Vicor

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

Diversification Opportunities for Hon Hai and Vicor

0.73

Correlation Coefficient

Hon Hai  Vicor

Poor diversification

The 3 months correlation between Hon and Vicor is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Vicor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicor 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 Vicor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicor has no effect on the direction of Hon Hai i.e., Hon Hai and Vicor go up and down completely randomly.

Pair Corralation between Hon Hai and Vicor

Assuming the 90 days horizon Hon Hai Precision is expected to under-perform the Vicor. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 2.63 times less risky than Vicor. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Vicor is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,689  in Vicor on September 3, 2024 and sell it today you would earn a total of  632.00  from holding Vicor or generate 13.48% 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.  Vicor

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.

Vicor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vicor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Vicor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hon Hai and Vicor

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

The idea behind Hon Hai Precision and Vicor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.