Correlation Between AU Optronics and GeoVision

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

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

Diversification Opportunities for AU Optronics and GeoVision

0.68

Correlation Coefficient

AU Optronics  GeoVision

Poor diversification

The 3 months correlation between 2409 and GeoVision is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and GeoVision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoVision 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 GeoVision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoVision has no effect on the direction of AU Optronics i.e., AU Optronics and GeoVision go up and down completely randomly.

Pair Corralation between AU Optronics and GeoVision

Assuming the 90 days trading horizon AU Optronics is expected to under-perform the GeoVision. In addition to that, AU Optronics is 1.02 times more volatile than GeoVision. It trades about -0.03 of its total potential returns per unit of risk. GeoVision is currently generating about 0.02 per unit of volatility. If you would invest  5,550  in GeoVision on December 30, 2024 and sell it today you would earn a total of  80.00  from holding GeoVision or generate 1.44% return on investment over 90 days.

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

AU Optronics  vs.  GeoVision

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.

GeoVision

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GeoVision are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, GeoVision 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 GeoVision

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

The idea behind AU Optronics and GeoVision 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.