Correlation Between ASE Industrial and Orient Europharma

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

Diversification Opportunities for ASE Industrial and Orient Europharma

-0.49

Correlation Coefficient

ASE Industrial  Orient Europharma

Very good diversification

The 3 months correlation between ASE and Orient is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Orient Europharma Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Europharma 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 Orient Europharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Europharma has no effect on the direction of ASE Industrial i.e., ASE Industrial and Orient Europharma go up and down completely randomly.

Pair Corralation between ASE Industrial and Orient Europharma

Assuming the 90 days trading horizon ASE Industrial Holding is expected to generate 2.27 times more return on investment than Orient Europharma. However, ASE Industrial is 2.27 times more volatile than Orient Europharma Co. It trades about 0.17 of its potential returns per unit of risk. Orient Europharma Co is currently generating about 0.05 per unit of risk. If you would invest  16,050  in ASE Industrial Holding on October 23, 2024 and sell it today you would earn a total of  1,150  from holding ASE Industrial Holding or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

ASE Industrial Holding  vs.  Orient Europharma Co

ASE Industrial Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Orient Europharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orient Europharma Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Orient Europharma 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 ASE Industrial and Orient Europharma

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

The idea behind ASE Industrial Holding and Orient Europharma Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.