Correlation Between Hon Hai and Corning Incorporated

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

Diversification Opportunities for Hon Hai and Corning Incorporated

0.3

Correlation Coefficient

Hon Hai  Corning Incorporated

Weak diversification

The 3 months correlation between Hon and Corning is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Corning Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corning Incorporated 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 Corning Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corning Incorporated has no effect on the direction of Hon Hai i.e., Hon Hai and Corning Incorporated go up and down completely randomly.

Pair Corralation between Hon Hai and Corning Incorporated

Assuming the 90 days trading horizon Hon Hai Precision is expected to under-perform the Corning Incorporated. In addition to that, Hon Hai is 1.43 times more volatile than Corning Incorporated. It trades about -0.28 of its total potential returns per unit of risk. Corning Incorporated is currently generating about 0.02 per unit of volatility. If you would invest  4,599  in Corning Incorporated on October 1, 2024 and sell it today you would earn a total of  15.00  from holding Corning Incorporated or generate 0.33% return on investment over 90 days.

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

Hon Hai Precision  vs.  Corning Incorporated

Hon Hai Precision

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 3 (%) 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.

Corning Incorporated

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corning Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Corning Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hon Hai and Corning Incorporated

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

The idea behind Hon Hai Precision and Corning Incorporated 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.