Correlation Between AU Optronics and Taiwan Mask

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

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

Diversification Opportunities for AU Optronics and Taiwan Mask

0.82

Correlation Coefficient

AU Optronics  Taiwan Mask

Very poor diversification

The 3 months correlation between 2409 and Taiwan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Taiwan Mask Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Mask Corp and AU Optronics 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 AU Optronics are associated (or correlated) with Taiwan Mask. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Mask Corp has no effect on the direction of AU Optronics i.e., AU Optronics and Taiwan Mask go up and down completely randomly.

Pair Corralation between AU Optronics and Taiwan Mask

Assuming the 90 days trading horizon AU Optronics is expected to generate 0.92 times more return on investment than Taiwan Mask. However, AU Optronics is 1.09 times less risky than Taiwan Mask. It trades about 0.19 of its potential returns per unit of risk. Taiwan Mask Corp is currently generating about -0.1 per unit of risk. If you would invest  1,375  in AU Optronics on December 5, 2024 and sell it today you would earn a total of  95.00  from holding AU Optronics or generate 6.91% return on investment over 90 days.

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

AU Optronics  vs.  Taiwan Mask Corp

AU Optronics

Risk-Adjusted Performance

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.

Taiwan Mask Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taiwan Mask 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with AU Optronics and Taiwan Mask

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

The idea behind AU Optronics and Taiwan Mask 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.