Correlation Between AU Optronics and Lungyen Life

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

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

Diversification Opportunities for AU Optronics and Lungyen Life

-0.88

Correlation Coefficient

AU Optronics  Lungyen Life

Pay attention - limited upside

The 3 months correlation between 2409 and Lungyen is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Lungyen Life Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lungyen Life Service 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 Lungyen Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lungyen Life Service has no effect on the direction of AU Optronics i.e., AU Optronics and Lungyen Life go up and down completely randomly.

Pair Corralation between AU Optronics and Lungyen Life

Assuming the 90 days trading horizon AU Optronics is expected to generate 10.11 times less return on investment than Lungyen Life. In addition to that, AU Optronics is 1.31 times more volatile than Lungyen Life Service. It trades about 0.0 of its total potential returns per unit of risk. Lungyen Life Service is currently generating about 0.06 per unit of volatility. If you would invest  3,745  in Lungyen Life Service on October 4, 2024 and sell it today you would earn a total of  1,795  from holding Lungyen Life Service or generate 47.93% return on investment over 90 days.

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

AU Optronics  vs.  Lungyen Life Service

AU Optronics

Risk-Adjusted Performance

0 of 100

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Lungyen Life Service

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lungyen Life Service are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lungyen Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AU Optronics and Lungyen Life

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

The idea behind AU Optronics and Lungyen Life Service 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.