Correlation Between AU Optronics and Taiwan Chinsan

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

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

Diversification Opportunities for AU Optronics and Taiwan Chinsan

0.59

Correlation Coefficient

AU Optronics  Taiwan Chinsan

Very weak diversification

The 3 months correlation between 2409 and Taiwan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Taiwan Chinsan Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Chinsan Electronic 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 Taiwan Chinsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Chinsan Electronic has no effect on the direction of AU Optronics i.e., AU Optronics and Taiwan Chinsan go up and down completely randomly.

Pair Corralation between AU Optronics and Taiwan Chinsan

Assuming the 90 days trading horizon AU Optronics is expected to generate 0.56 times more return on investment than Taiwan Chinsan. However, AU Optronics is 1.78 times less risky than Taiwan Chinsan. It trades about 0.0 of its potential returns per unit of risk. Taiwan Chinsan Electronic is currently generating about -0.02 per unit of risk. If you would invest  1,510  in AU Optronics on December 27, 2024 and sell it today you would lose (20.00) from holding AU Optronics or give up 1.32% of portfolio value over 90 days.

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

AU Optronics  vs.  Taiwan Chinsan Electronic

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.

Taiwan Chinsan Electronic

Risk-Adjusted Performance

Very Weak

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

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

The idea behind AU Optronics and Taiwan Chinsan Electronic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.