Correlation Between Innolux Corp and Acer E

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

By analyzing existing cross correlation between Innolux Corp and Acer E Enabling Service, you can compare the effects of market volatilities on Innolux Corp and Acer E 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 Acer E. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innolux Corp and Acer E.

Diversification Opportunities for Innolux Corp and Acer E

-0.38

Correlation Coefficient

Innolux Corp  Acer E

Very good diversification

The 3 months correlation between Innolux and Acer is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Innolux Corp and Acer E Enabling Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acer E Enabling 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 Acer E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acer E Enabling has no effect on the direction of Innolux Corp i.e., Innolux Corp and Acer E go up and down completely randomly.

Pair Corralation between Innolux Corp and Acer E

Assuming the 90 days trading horizon Innolux Corp is expected to under-perform the Acer E. But the stock apears to be less risky and, when comparing its historical volatility, Innolux Corp is 1.55 times less risky than Acer E. The stock trades about -0.29 of its potential returns per unit of risk. The Acer E Enabling Service is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  31,500  in Acer E Enabling Service on October 9, 2024 and sell it today you would lose (2,400) from holding Acer E Enabling Service or give up 7.62% of portfolio value over 90 days.

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

Innolux Corp  vs.  Acer E Enabling Service

Innolux Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innolux Corp 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.

Acer E Enabling

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acer E Enabling Service are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Acer E showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innolux Corp and Acer E

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

The idea behind Innolux Corp and Acer E Enabling Service 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.