Correlation Between Transcend Information and AU Optronics

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

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

Diversification Opportunities for Transcend Information and AU Optronics

0.58

Correlation Coefficient

Transcend Information  AU Optronics

Very weak diversification

The 3 months correlation between Transcend and 2409 is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Transcend Information and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Transcend Information 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 Transcend Information are associated (or correlated) with AU Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AU Optronics has no effect on the direction of Transcend Information i.e., Transcend Information and AU Optronics go up and down completely randomly.

Pair Corralation between Transcend Information and AU Optronics

Assuming the 90 days trading horizon Transcend Information is expected to generate 1.01 times more return on investment than AU Optronics. However, Transcend Information is 1.01 times more volatile than AU Optronics. It trades about 0.16 of its potential returns per unit of risk. AU Optronics is currently generating about -0.03 per unit of risk. If you would invest  8,680  in Transcend Information on December 30, 2024 and sell it today you would earn a total of  1,520  from holding Transcend Information or generate 17.51% return on investment over 90 days.

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

Transcend Information  vs.  AU Optronics

Transcend Information

Risk-Adjusted Performance

Good

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

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.

Pair Trading with Transcend Information and AU Optronics

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

The idea behind Transcend Information and AU Optronics 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.