Correlation Between Murata Manufacturing and Hon Hai

Can any of the company-specific risk be diversified away by investing in both Murata Manufacturing and Hon Hai 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 Murata Manufacturing and Hon Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Murata Manufacturing Co and Hon Hai Precision, you can compare the effects of market volatilities on Murata Manufacturing and Hon Hai 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 Murata Manufacturing with a short position of Hon Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murata Manufacturing and Hon Hai.

Diversification Opportunities for Murata Manufacturing and Hon Hai

0.25

Correlation Coefficient

Murata Manufacturing  Hon Hai

Modest diversification

The 3 months correlation between Murata and Hon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing Co and Hon Hai Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hon Hai Precision and Murata Manufacturing 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 Murata Manufacturing Co are associated (or correlated) with Hon Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hon Hai Precision has no effect on the direction of Murata Manufacturing i.e., Murata Manufacturing and Hon Hai go up and down completely randomly.

Pair Corralation between Murata Manufacturing and Hon Hai

Assuming the 90 days trading horizon Murata Manufacturing Co is expected to generate 0.47 times more return on investment than Hon Hai. However, Murata Manufacturing Co is 2.12 times less risky than Hon Hai. It trades about 0.02 of its potential returns per unit of risk. Hon Hai Precision is currently generating about -0.04 per unit of risk. If you would invest  1,502  in Murata Manufacturing Co on December 29, 2024 and sell it today you would earn a total of  26.00  from holding Murata Manufacturing Co or generate 1.73% return on investment over 90 days.

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

Murata Manufacturing Co  vs.  Hon Hai Precision

Murata Manufacturing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Murata Manufacturing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Murata Manufacturing is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Murata Manufacturing and Hon Hai

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

The idea behind Murata Manufacturing Co and Hon Hai Precision 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.