Correlation Between Silicon Integrated and AU Optronics

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

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

Diversification Opportunities for Silicon Integrated and AU Optronics

0.28

Correlation Coefficient

Silicon Integrated  AU Optronics

Modest diversification

The 3 months correlation between Silicon and 2409 is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Integrated Systems and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Silicon Integrated 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 Silicon Integrated Systems 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 Silicon Integrated i.e., Silicon Integrated and AU Optronics go up and down completely randomly.

Pair Corralation between Silicon Integrated and AU Optronics

Assuming the 90 days trading horizon Silicon Integrated Systems is expected to generate 3.2 times more return on investment than AU Optronics. However, Silicon Integrated is 3.2 times more volatile than AU Optronics. It trades about 0.05 of its potential returns per unit of risk. AU Optronics is currently generating about -0.04 per unit of risk. If you would invest  5,870  in Silicon Integrated Systems on September 13, 2024 and sell it today you would earn a total of  1,290  from holding Silicon Integrated Systems or generate 21.98% return on investment over 90 days.

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

Silicon Integrated Systems  vs.  AU Optronics

Silicon Integrated

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Silicon Integrated Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Silicon Integrated showed solid returns over the last few months and may actually be approaching a breakup point.

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 fairly stable basic indicators, AU Optronics 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 Silicon Integrated and AU Optronics

The main advantage of trading using opposite Silicon Integrated and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Integrated 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 Silicon Integrated Systems 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.