Correlation Between Hon Hai and Flowtech Fluidpower

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

Diversification Opportunities for Hon Hai and Flowtech Fluidpower

0.86

Correlation Coefficient

Hon Hai  Flowtech Fluidpower

Very poor diversification

The 3 months correlation between Hon and Flowtech is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Flowtech Fluidpower plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowtech Fluidpower plc 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 Flowtech Fluidpower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowtech Fluidpower plc has no effect on the direction of Hon Hai i.e., Hon Hai and Flowtech Fluidpower go up and down completely randomly.

Pair Corralation between Hon Hai and Flowtech Fluidpower

Assuming the 90 days trading horizon Hon Hai Precision is expected to generate 1.07 times more return on investment than Flowtech Fluidpower. However, Hon Hai is 1.07 times more volatile than Flowtech Fluidpower plc. It trades about 0.24 of its potential returns per unit of risk. Flowtech Fluidpower plc is currently generating about -0.07 per unit of risk. If you would invest  1,030  in Hon Hai Precision on April 23, 2025 and sell it today you would earn a total of  98.00  from holding Hon Hai Precision or generate 9.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Hon Hai Precision  vs.  Flowtech Fluidpower plc

Hon Hai Precision

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hon Hai Precision are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hon Hai unveiled solid returns over the last few months and may actually be approaching a breakup point.

Flowtech Fluidpower plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flowtech Fluidpower plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Flowtech Fluidpower exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hon Hai and Flowtech Fluidpower

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

The idea behind Hon Hai Precision and Flowtech Fluidpower plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.