Correlation Between Bank of Kaohsiung and Optivision Technology

Can any of the company-specific risk be diversified away by investing in both Bank of Kaohsiung and Optivision Technology 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 Bank of Kaohsiung and Optivision Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Bank of Kaohsiung and Optivision Technology

0.56

Correlation Coefficient

Bank of Kaohsiung  Optivision Technology

Very weak diversification

The 3 months correlation between Bank and Optivision is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Kaohsiung and Optivision Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optivision Technology and Bank of Kaohsiung 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 Bank of Kaohsiung are associated (or correlated) with Optivision Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optivision Technology has no effect on the direction of Bank of Kaohsiung i.e., Bank of Kaohsiung and Optivision Technology go up and down completely randomly.

Pair Corralation between Bank of Kaohsiung and Optivision Technology

Assuming the 90 days trading horizon Bank of Kaohsiung is expected to generate 10.19 times less return on investment than Optivision Technology. But when comparing it to its historical volatility, Bank of Kaohsiung is 2.53 times less risky than Optivision Technology. It trades about 0.04 of its potential returns per unit of risk. Optivision Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,940  in Optivision Technology on December 24, 2024 and sell it today you would earn a total of  425.00  from holding Optivision Technology or generate 14.46% return on investment over 90 days.

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

Bank of Kaohsiung  vs.  Optivision Technology

Bank of Kaohsiung

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Kaohsiung are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Bank of Kaohsiung is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Optivision Technology

Risk-Adjusted Performance

OK

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

Pair Trading with Bank of Kaohsiung and Optivision Technology

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

The idea behind Bank of Kaohsiung and Optivision Technology 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.