Correlation Between King Yuan and ASE Industrial

Can any of the company-specific risk be diversified away by investing in both King Yuan and ASE Industrial 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 King Yuan and ASE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between King Yuan Electronics and ASE Industrial Holding, you can compare the effects of market volatilities on King Yuan and ASE Industrial 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 King Yuan with a short position of ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Yuan and ASE Industrial.

Diversification Opportunities for King Yuan and ASE Industrial

-0.59

Correlation Coefficient

King Yuan  ASE Industrial

Excellent diversification

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

Pair Corralation between King Yuan and ASE Industrial

Assuming the 90 days trading horizon King Yuan Electronics is expected to generate 1.27 times more return on investment than ASE Industrial. However, King Yuan is 1.27 times more volatile than ASE Industrial Holding. It trades about 0.09 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.06 per unit of risk. If you would invest  3,980  in King Yuan Electronics on October 26, 2024 and sell it today you would earn a total of  7,370  from holding King Yuan Electronics or generate 185.18% return on investment over 90 days.

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

King Yuan Electronics  vs.  ASE Industrial Holding

King Yuan Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days King Yuan Electronics 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.

ASE Industrial Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with King Yuan and ASE Industrial

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

The idea behind King Yuan Electronics and ASE Industrial Holding 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.