Correlation Between Elite Semiconductor and AU Optronics

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

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

Diversification Opportunities for Elite Semiconductor and AU Optronics

0.83

Correlation Coefficient

Elite Semiconductor  AU Optronics

Very poor diversification

The 3 months correlation between Elite and 2409 is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Elite Semiconductor 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 Elite Semiconductor Memory 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 Elite Semiconductor i.e., Elite Semiconductor and AU Optronics go up and down completely randomly.

Pair Corralation between Elite Semiconductor and AU Optronics

Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to under-perform the AU Optronics. In addition to that, Elite Semiconductor is 1.16 times more volatile than AU Optronics. It trades about -0.1 of its total potential returns per unit of risk. AU Optronics is currently generating about -0.06 per unit of volatility. If you would invest  1,705  in AU Optronics on September 14, 2024 and sell it today you would lose (100.00) from holding AU Optronics or give up 5.87% of portfolio value over 90 days.

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

Elite Semiconductor Memory  vs.  AU Optronics

Elite Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Semiconductor Memory 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.

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 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 Elite Semiconductor and AU Optronics

The main advantage of trading using opposite Elite Semiconductor and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Semiconductor 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 Elite Semiconductor Memory 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.