Correlation Between AU Optronics and Chialin Precision

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

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

Diversification Opportunities for AU Optronics and Chialin Precision

-0.27

Correlation Coefficient

AU Optronics  Chialin Precision

Very good diversification

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

Pair Corralation between AU Optronics and Chialin Precision

Assuming the 90 days trading horizon AU Optronics is expected to generate 1.5 times more return on investment than Chialin Precision. However, AU Optronics is 1.5 times more volatile than Chialin Precision Industrial. It trades about 0.0 of its potential returns per unit of risk. Chialin Precision Industrial is currently generating about -0.05 per unit of risk. If you would invest  1,520  in AU Optronics on December 24, 2024 and sell it today you would lose (15.00) from holding AU Optronics or give up 0.99% of portfolio value over 90 days.

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

AU Optronics  vs.  Chialin Precision Industrial

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.

Chialin Precision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chialin Precision Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chialin Precision 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 Chialin Precision

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

The idea behind AU Optronics and Chialin Precision Industrial 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.