Correlation Between AU Optronics and Wistron Corp

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

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

Diversification Opportunities for AU Optronics and Wistron Corp

0.27

Correlation Coefficient

AU Optronics  Wistron Corp

Modest diversification

The 3 months correlation between 2409 and Wistron is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Wistron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron 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 Wistron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Corp has no effect on the direction of AU Optronics i.e., AU Optronics and Wistron Corp go up and down completely randomly.

Pair Corralation between AU Optronics and Wistron Corp

Assuming the 90 days trading horizon AU Optronics is expected to under-perform the Wistron Corp. But the stock apears to be less risky and, when comparing its historical volatility, AU Optronics is 1.3 times less risky than Wistron Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Wistron Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10,400  in Wistron Corp on December 30, 2024 and sell it today you would lose (350.00) from holding Wistron Corp or give up 3.37% of portfolio value over 90 days.

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

AU Optronics  vs.  Wistron 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 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.

Wistron Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wistron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wistron Corp 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 AU Optronics and Wistron Corp

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

The idea behind AU Optronics and Wistron 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.