Correlation Between ASE Industrial and Global Unichip

Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Global Unichip 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 ASE Industrial and Global Unichip into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASE Industrial Holding and Global Unichip Corp, you can compare the effects of market volatilities on ASE Industrial and Global Unichip 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 ASE Industrial with a short position of Global Unichip. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Global Unichip.

Diversification Opportunities for ASE Industrial and Global Unichip

0.66

Correlation Coefficient

ASE Industrial  Global Unichip

Poor diversification

The 3 months correlation between ASE and Global is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Global Unichip Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Unichip Corp and ASE Industrial 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 ASE Industrial Holding are associated (or correlated) with Global Unichip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Unichip Corp has no effect on the direction of ASE Industrial i.e., ASE Industrial and Global Unichip go up and down completely randomly.

Pair Corralation between ASE Industrial and Global Unichip

Assuming the 90 days trading horizon ASE Industrial Holding is expected to generate 0.64 times more return on investment than Global Unichip. However, ASE Industrial Holding is 1.55 times less risky than Global Unichip. It trades about 0.05 of its potential returns per unit of risk. Global Unichip Corp is currently generating about 0.03 per unit of risk. If you would invest  10,850  in ASE Industrial Holding on December 2, 2024 and sell it today you would earn a total of  6,250  from holding ASE Industrial Holding or generate 57.6% return on investment over 90 days.

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

ASE Industrial Holding  vs.  Global Unichip Corp

ASE Industrial Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ASE Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Global Unichip Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Unichip Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Global Unichip showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASE Industrial and Global Unichip

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

The idea behind ASE Industrial Holding and Global Unichip Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.