Correlation Between Century Wind and Asustek Computer

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

By analyzing existing cross correlation between Century Wind Power and Asustek Computer, you can compare the effects of market volatilities on Century Wind and Asustek Computer 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 Century Wind with a short position of Asustek Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Wind and Asustek Computer.

Diversification Opportunities for Century Wind and Asustek Computer

-0.63

Correlation Coefficient

Century Wind  Asustek Computer

Excellent diversification

The 3 months correlation between Century and Asustek is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Century Wind Power and Asustek Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asustek Computer and Century Wind 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 Century Wind Power are associated (or correlated) with Asustek Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asustek Computer has no effect on the direction of Century Wind i.e., Century Wind and Asustek Computer go up and down completely randomly.

Pair Corralation between Century Wind and Asustek Computer

Assuming the 90 days trading horizon Century Wind Power is expected to under-perform the Asustek Computer. But the stock apears to be less risky and, when comparing its historical volatility, Century Wind Power is 1.94 times less risky than Asustek Computer. The stock trades about -0.06 of its potential returns per unit of risk. The Asustek Computer is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  60,200  in Asustek Computer on September 25, 2024 and sell it today you would earn a total of  1,300  from holding Asustek Computer or generate 2.16% return on investment over 90 days.

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

Century Wind Power  vs.  Asustek Computer

Century Wind Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Wind Power 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.

Asustek Computer

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Asustek Computer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Asustek Computer is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Century Wind and Asustek Computer

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

The idea behind Century Wind Power and Asustek Computer 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.