Correlation Between Innolux Corp and King Yuan

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

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

Diversification Opportunities for Innolux Corp and King Yuan

0.26

Correlation Coefficient

Innolux Corp  King Yuan

Modest diversification

The 3 months correlation between Innolux and King is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Innolux Corp and King Yuan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Yuan Electronics and Innolux Corp 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 Innolux Corp are associated (or correlated) with King Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Yuan Electronics has no effect on the direction of Innolux Corp i.e., Innolux Corp and King Yuan go up and down completely randomly.

Pair Corralation between Innolux Corp and King Yuan

Assuming the 90 days trading horizon Innolux Corp is expected to generate 1.42 times less return on investment than King Yuan. But when comparing it to its historical volatility, Innolux Corp is 1.61 times less risky than King Yuan. It trades about 0.02 of its potential returns per unit of risk. King Yuan Electronics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,450  in King Yuan Electronics on September 14, 2024 and sell it today you would earn a total of  150.00  from holding King Yuan Electronics or generate 1.31% return on investment over 90 days.

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

Innolux Corp  vs.  King Yuan Electronics

Innolux Corp

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innolux Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Innolux Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

King Yuan Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in King Yuan Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, King Yuan 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 Innolux Corp and King Yuan

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

The idea behind Innolux Corp and King Yuan Electronics 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.