Correlation Between Hon Hai and Alibaba Group
Can any of the company-specific risk be diversified away by investing in both Hon Hai and Alibaba Group 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 Alibaba Group 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 Alibaba Group Holding, you can compare the effects of market volatilities on Hon Hai and Alibaba Group 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 Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Alibaba Group.
Diversification Opportunities for Hon Hai and Alibaba Group
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hon and Alibaba is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Hon Hai i.e., Hon Hai and Alibaba Group go up and down completely randomly.
Pair Corralation between Hon Hai and Alibaba Group
Assuming the 90 days trading horizon Hon Hai is expected to generate 2.43 times less return on investment than Alibaba Group. But when comparing it to its historical volatility, Hon Hai Precision is 1.35 times less risky than Alibaba Group. It trades about 0.06 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 13,000 in Alibaba Group Holding on September 3, 2025 and sell it today you would earn a total of 3,045 from holding Alibaba Group Holding or generate 23.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Alibaba Group Holding
Performance |
| Timeline |
| Hon Hai Precision |
| Alibaba Group Holding |
Hon Hai and Alibaba Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Alibaba Group
The main advantage of trading using opposite Hon Hai and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai position performs unexpectedly, Alibaba Group 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 Alibaba Group will offset losses from the drop in Alibaba Group's long position.| Hon Hai vs. Sydbank | Hon Hai vs. Axway Software SA | Hon Hai vs. Lloyds Banking Group | Hon Hai vs. National Bank of |
| Alibaba Group vs. Sydbank | Alibaba Group vs. International Consolidated Airlines | Alibaba Group vs. St Galler Kantonalbank | Alibaba Group vs. FinecoBank SpA |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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