Correlation Between AU Optronics and Gigasolar Materials

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

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

Diversification Opportunities for AU Optronics and Gigasolar Materials

0.94

Correlation Coefficient

AU Optronics  Gigasolar Materials

Almost no diversification

The 3 months correlation between 2409 and Gigasolar is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Gigasolar Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gigasolar Materials 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 Gigasolar Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gigasolar Materials has no effect on the direction of AU Optronics i.e., AU Optronics and Gigasolar Materials go up and down completely randomly.

Pair Corralation between AU Optronics and Gigasolar Materials

Assuming the 90 days trading horizon AU Optronics is expected to generate 1.38 times less return on investment than Gigasolar Materials. But when comparing it to its historical volatility, AU Optronics is 1.4 times less risky than Gigasolar Materials. It trades about 0.33 of its potential returns per unit of risk. Gigasolar Materials is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  6,940  in Gigasolar Materials on December 2, 2024 and sell it today you would earn a total of  1,050  from holding Gigasolar Materials or generate 15.13% return on investment over 90 days.

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

AU Optronics  vs.  Gigasolar Materials

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.

Gigasolar Materials

Risk-Adjusted Performance

Very Weak

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

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

The idea behind AU Optronics and Gigasolar Materials 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.