Correlation Between ASE Industrial and Innolux Corp

Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Innolux Corp 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 Innolux Corp 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 Innolux Corp, you can compare the effects of market volatilities on ASE Industrial and Innolux Corp 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 Innolux Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Innolux Corp.

Diversification Opportunities for ASE Industrial and Innolux Corp

-0.19

Correlation Coefficient

ASE Industrial  Innolux Corp

Good diversification

The 3 months correlation between ASE and Innolux is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Innolux Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innolux 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 Innolux Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innolux Corp has no effect on the direction of ASE Industrial i.e., ASE Industrial and Innolux Corp go up and down completely randomly.

Pair Corralation between ASE Industrial and Innolux Corp

Assuming the 90 days trading horizon ASE Industrial Holding is expected to under-perform the Innolux Corp. In addition to that, ASE Industrial is 1.29 times more volatile than Innolux Corp. It trades about 0.0 of its total potential returns per unit of risk. Innolux Corp is currently generating about 0.1 per unit of volatility. If you would invest  1,455  in Innolux Corp on December 27, 2024 and sell it today you would earn a total of  145.00  from holding Innolux Corp or generate 9.97% return on investment over 90 days.

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

ASE Industrial Holding  vs.  Innolux Corp

ASE Industrial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASE Industrial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ASE Industrial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Innolux Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innolux Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Innolux Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ASE Industrial and Innolux Corp

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

The idea behind ASE Industrial Holding and Innolux 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.