Correlation Between Hiscox and Hon Hai

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

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

Diversification Opportunities for Hiscox and Hon Hai

0.53

Correlation Coefficient

Hiscox  Hon Hai

Very weak diversification

The 3 months correlation between Hiscox and Hon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hiscox 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 Hiscox 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 Hiscox 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 Hiscox i.e., Hiscox and Hon Hai go up and down completely randomly.

Pair Corralation between Hiscox and Hon Hai

Assuming the 90 days trading horizon Hiscox is expected to generate 1.95 times less return on investment than Hon Hai. But when comparing it to its historical volatility, Hiscox is 1.58 times less risky than Hon Hai. It trades about 0.18 of its potential returns per unit of risk. Hon Hai Precision is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  830.00  in Hon Hai Precision on April 24, 2025 and sell it today you would earn a total of  272.00  from holding Hon Hai Precision or generate 32.77% return on investment over 90 days.

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

Hiscox  vs.  Hon Hai Precision

Hiscox

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hiscox are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Hiscox exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hon Hai Precision

Risk-Adjusted Performance

Solid

Over the last 90 days Hon Hai Precision has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite weak essential indicators, Hon Hai disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hiscox and Hon Hai

The main advantage of trading using opposite Hiscox and Hon Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hiscox 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 Hiscox 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.