Correlation Between KYE Systems and AU Optronics

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

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

Diversification Opportunities for KYE Systems and AU Optronics

0.6

Correlation Coefficient

KYE Systems  AU Optronics

Poor diversification

The 3 months correlation between KYE and 2409 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding KYE Systems Corp and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and KYE Systems 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 KYE Systems Corp 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 KYE Systems i.e., KYE Systems and AU Optronics go up and down completely randomly.

Pair Corralation between KYE Systems and AU Optronics

Assuming the 90 days trading horizon KYE Systems Corp is expected to generate 1.74 times more return on investment than AU Optronics. However, KYE Systems is 1.74 times more volatile than AU Optronics. It trades about 0.11 of its potential returns per unit of risk. AU Optronics is currently generating about 0.02 per unit of risk. If you would invest  983.00  in KYE Systems Corp on September 14, 2024 and sell it today you would earn a total of  3,237  from holding KYE Systems Corp or generate 329.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

KYE Systems Corp  vs.  AU Optronics

KYE Systems Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KYE Systems Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 KYE Systems and AU Optronics

The main advantage of trading using opposite KYE Systems and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KYE Systems 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 KYE Systems Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.