Correlation Between AU Optronics and Elite Material

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

By analyzing existing cross correlation between AU Optronics and Elite Material Co, you can compare the effects of market volatilities on AU Optronics and Elite Material 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 Elite Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Elite Material.

Diversification Opportunities for AU Optronics and Elite Material

-0.51

Correlation Coefficient

AU Optronics  Elite Material

Excellent diversification

The 3 months correlation between 2409 and Elite is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material 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 Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of AU Optronics i.e., AU Optronics and Elite Material go up and down completely randomly.

Pair Corralation between AU Optronics and Elite Material

Assuming the 90 days trading horizon AU Optronics is expected to generate 21.85 times less return on investment than Elite Material. But when comparing it to its historical volatility, AU Optronics is 2.23 times less risky than Elite Material. It trades about 0.05 of its potential returns per unit of risk. Elite Material Co is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  44,150  in Elite Material Co on September 15, 2024 and sell it today you would earn a total of  15,750  from holding Elite Material Co or generate 35.67% return on investment over 90 days.

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

AU Optronics  vs.  Elite Material Co

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.

Elite Material

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Material Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elite Material showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AU Optronics and Elite Material

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

The idea behind AU Optronics and Elite Material Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.