Correlation Between Hon Hai and Csl

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

Diversification Opportunities for Hon Hai and Csl

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between HNHPF and Csl is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Csl Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Csl Ltd ADR 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 Csl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Csl Ltd ADR has no effect on the direction of Hon Hai i.e., Hon Hai and Csl go up and down completely randomly.

Pair Corralation between Hon Hai and Csl

Assuming the 90 days horizon Hon Hai Precision is expected to under-perform the Csl. But the otc stock apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.35 times less risky than Csl. The otc stock trades about -0.02 of its potential returns per unit of risk. The Csl Ltd ADR is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  8,853  in Csl Ltd ADR on August 28, 2022 and sell it today you would earn a total of  1,255  from holding Csl Ltd ADR or generate 14.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hon Hai Precision  vs.  Csl Ltd ADR

 Performance (%) 
       Timeline  
Hon Hai Precision 
HNHPF Performance
0 of 100
Over the last 90 days Hon Hai Precision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

HNHPF Price Channel

Csl Ltd ADR 
Csl Performance
0 of 100
Over the last 90 days Csl Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Csl is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Csl Price Channel

Hon Hai and Csl Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hon Hai and Csl

The main advantage of trading using opposite Hon Hai and Csl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Csl 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 Csl will offset losses from the drop in Csl's long position.
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The idea behind Hon Hai Precision and Csl Ltd ADR 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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