Correlation Between AU Optronics and FocalTech Systems

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

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

Diversification Opportunities for AU Optronics and FocalTech Systems

0.17

Correlation Coefficient

AU Optronics  FocalTech Systems

Average diversification

The 3 months correlation between 2409 and FocalTech is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and FocalTech Systems Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FocalTech Systems 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 FocalTech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FocalTech Systems has no effect on the direction of AU Optronics i.e., AU Optronics and FocalTech Systems go up and down completely randomly.

Pair Corralation between AU Optronics and FocalTech Systems

Assuming the 90 days trading horizon AU Optronics is expected to generate 4.27 times less return on investment than FocalTech Systems. But when comparing it to its historical volatility, AU Optronics is 1.13 times less risky than FocalTech Systems. It trades about 0.05 of its potential returns per unit of risk. FocalTech Systems Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  7,380  in FocalTech Systems Co on September 5, 2024 and sell it today you would earn a total of  1,510  from holding FocalTech Systems Co or generate 20.46% return on investment over 90 days.

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

AU Optronics  vs.  FocalTech Systems Co

AU Optronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AU Optronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

FocalTech Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FocalTech Systems Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FocalTech Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AU Optronics and FocalTech Systems

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

The idea behind AU Optronics and FocalTech Systems 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.