Correlation Between AU Optronics and E Ink

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

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

Diversification Opportunities for AU Optronics and E Ink

0.67

Correlation Coefficient

AU Optronics  E Ink

Poor diversification

The 3 months correlation between 2409 and 8069 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and E Ink Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Ink Holdings 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 E Ink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Ink Holdings has no effect on the direction of AU Optronics i.e., AU Optronics and E Ink go up and down completely randomly.

Pair Corralation between AU Optronics and E Ink

Assuming the 90 days trading horizon AU Optronics is expected to under-perform the E Ink. But the stock apears to be less risky and, when comparing its historical volatility, AU Optronics is 1.32 times less risky than E Ink. The stock trades about -0.01 of its potential returns per unit of risk. The E Ink Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17,204  in E Ink Holdings on October 23, 2024 and sell it today you would earn a total of  10,296  from holding E Ink Holdings or generate 59.85% 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.  E Ink Holdings

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.

E Ink Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Ink Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with AU Optronics and E Ink

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

The idea behind AU Optronics and E Ink Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.