Correlation Between Chroma ATE and AU Optronics

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

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

Diversification Opportunities for Chroma ATE and AU Optronics

-0.34

Correlation Coefficient

Chroma ATE  AU Optronics

Very good diversification

The 3 months correlation between Chroma and 2409 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Chroma ATE and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Chroma ATE 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 Chroma ATE are associated (or correlated) with AU Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AU Optronics has no effect on the direction of Chroma ATE i.e., Chroma ATE and AU Optronics go up and down completely randomly.

Pair Corralation between Chroma ATE and AU Optronics

Assuming the 90 days trading horizon Chroma ATE is expected to generate 2.04 times more return on investment than AU Optronics. However, Chroma ATE is 2.04 times more volatile than AU Optronics. It trades about 0.06 of its potential returns per unit of risk. AU Optronics is currently generating about -0.08 per unit of risk. If you would invest  37,550  in Chroma ATE on September 16, 2024 and sell it today you would earn a total of  2,950  from holding Chroma ATE or generate 7.86% return on investment over 90 days.

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

Chroma ATE  vs.  AU Optronics

Chroma ATE

Risk-Adjusted Performance

4 of 100

Insignificant

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

AU Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AU Optronics 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.

Pair Trading with Chroma ATE and AU Optronics

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

The idea behind Chroma ATE and AU Optronics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.