Correlation Between Asustek Computer and Ardentec

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

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

Diversification Opportunities for Asustek Computer and Ardentec

0.02

Correlation Coefficient

Asustek Computer  Ardentec

Significant diversification

The 3 months correlation between Asustek and Ardentec is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Asustek Computer and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec 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 Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of Asustek Computer i.e., Asustek Computer and Ardentec go up and down completely randomly.

Pair Corralation between Asustek Computer and Ardentec

Assuming the 90 days trading horizon Asustek Computer is expected to generate 1.14 times more return on investment than Ardentec. However, Asustek Computer is 1.14 times more volatile than Ardentec. It trades about 0.08 of its potential returns per unit of risk. Ardentec is currently generating about 0.04 per unit of risk. If you would invest  31,500  in Asustek Computer on October 24, 2024 and sell it today you would earn a total of  29,200  from holding Asustek Computer or generate 92.7% return on investment over 90 days.

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

Asustek Computer  vs.  Ardentec

Asustek Computer

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asustek Computer are ranked lower than 2 (%) 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.

Ardentec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ardentec are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ardentec may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Asustek Computer and Ardentec

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

The idea behind Asustek Computer and Ardentec 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.