Correlation Between Hon Hai and ASE Industrial

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

Diversification Opportunities for Hon Hai and ASE Industrial

0.57

Correlation Coefficient

Hon Hai  ASE Industrial

Very weak diversification

The 3 months correlation between Hon and ASE is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Hon Hai i.e., Hon Hai and ASE Industrial go up and down completely randomly.

Pair Corralation between Hon Hai and ASE Industrial

Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 0.94 times more return on investment than ASE Industrial. However, Hon Hai Precision is 1.06 times less risky than ASE Industrial. It trades about 0.08 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.07 per unit of risk. If you would invest  17,750  in Hon Hai Precision on September 12, 2024 and sell it today you would earn a total of  1,450  from holding Hon Hai Precision or generate 8.17% return on investment over 90 days.

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

Hon Hai Precision  vs.  ASE Industrial Holding

Hon Hai Precision

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hon Hai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ASE Industrial Holding

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hon Hai and ASE Industrial

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

The idea behind Hon Hai Precision and ASE Industrial Holding 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..