Correlation Between Champion Microelectronic and AU Optronics

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

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

Diversification Opportunities for Champion Microelectronic and AU Optronics

0.12

Correlation Coefficient

Champion Microelectronic  AU Optronics

Average diversification

The 3 months correlation between Champion and 2409 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Champion Microelectronic Corp and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Champion Microelectronic 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 Champion Microelectronic Corp 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 Champion Microelectronic i.e., Champion Microelectronic and AU Optronics go up and down completely randomly.

Pair Corralation between Champion Microelectronic and AU Optronics

Assuming the 90 days trading horizon Champion Microelectronic Corp is expected to generate 1.36 times more return on investment than AU Optronics. However, Champion Microelectronic is 1.36 times more volatile than AU Optronics. It trades about 0.05 of its potential returns per unit of risk. AU Optronics is currently generating about 0.01 per unit of risk. If you would invest  5,400  in Champion Microelectronic Corp on December 28, 2024 and sell it today you would earn a total of  270.00  from holding Champion Microelectronic Corp or generate 5.0% return on investment over 90 days.

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

Champion Microelectronic Corp  vs.  AU Optronics

Champion Microelectronic

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Microelectronic Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Champion Microelectronic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Champion Microelectronic and AU Optronics

The main advantage of trading using opposite Champion Microelectronic and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champion Microelectronic 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 Champion Microelectronic Corp 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.