Correlation Between Asustek Computer and Wistron Corp

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

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

Diversification Opportunities for Asustek Computer and Wistron Corp

0.81

Correlation Coefficient

Asustek Computer  Wistron Corp

Very poor diversification

The 3 months correlation between Asustek and Wistron is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Asustek Computer and Wistron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Corp and Asustek Computer 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 Asustek Computer are associated (or correlated) with Wistron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Corp has no effect on the direction of Asustek Computer i.e., Asustek Computer and Wistron Corp go up and down completely randomly.

Pair Corralation between Asustek Computer and Wistron Corp

Assuming the 90 days trading horizon Asustek Computer is expected to generate 0.78 times more return on investment than Wistron Corp. However, Asustek Computer is 1.28 times less risky than Wistron Corp. It trades about 0.13 of its potential returns per unit of risk. Wistron Corp is currently generating about 0.07 per unit of risk. If you would invest  54,400  in Asustek Computer on September 15, 2024 and sell it today you would earn a total of  7,100  from holding Asustek Computer or generate 13.05% return on investment over 90 days.

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

Asustek Computer  vs.  Wistron Corp

Asustek Computer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asustek Computer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asustek Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Wistron Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wistron Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Asustek Computer and Wistron Corp

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

The idea behind Asustek Computer and Wistron Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.