Correlation Between Amita Technologies and Hon Hai

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

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

Diversification Opportunities for Amita Technologies and Hon Hai

-0.33

Correlation Coefficient

Amita Technologies  Hon Hai

Very good diversification

The 3 months correlation between Amita and Hon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Amita Technologies 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 Amita Technologies 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 Amita Technologies 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 Amita Technologies i.e., Amita Technologies and Hon Hai go up and down completely randomly.

Pair Corralation between Amita Technologies and Hon Hai

Assuming the 90 days trading horizon Amita Technologies is expected to under-perform the Hon Hai. In addition to that, Amita Technologies is 1.3 times more volatile than Hon Hai Precision. It trades about -0.13 of its total potential returns per unit of risk. Hon Hai Precision is currently generating about 0.21 per unit of volatility. If you would invest  10,100  in Hon Hai Precision on March 3, 2024 and sell it today you would earn a total of  7,100  from holding Hon Hai Precision or generate 70.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.16%
Values	Daily Returns

Amita Technologies  vs.  Hon Hai Precision

Amita Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amita Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Hon Hai Precision

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hon Hai showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amita Technologies and Hon Hai

The main advantage of trading using opposite Amita Technologies and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amita Technologies 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 Amita Technologies 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.