Correlation Between Aspeed Technology and Chunghwa Precision

Can any of the company-specific risk be diversified away by investing in both Aspeed Technology and Chunghwa Precision 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 Aspeed Technology and Chunghwa Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aspeed Technology and Chunghwa Precision Test, you can compare the effects of market volatilities on Aspeed Technology and Chunghwa Precision 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 Aspeed Technology with a short position of Chunghwa Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspeed Technology and Chunghwa Precision.

Diversification Opportunities for Aspeed Technology and Chunghwa Precision

0.2

Correlation Coefficient

Aspeed Technology  Chunghwa Precision

Modest diversification

The 3 months correlation between Aspeed and Chunghwa is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Aspeed Technology and Chunghwa Precision Test in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Precision Test and Aspeed Technology 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 Aspeed Technology are associated (or correlated) with Chunghwa Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Precision Test has no effect on the direction of Aspeed Technology i.e., Aspeed Technology and Chunghwa Precision go up and down completely randomly.

Pair Corralation between Aspeed Technology and Chunghwa Precision

Assuming the 90 days trading horizon Aspeed Technology is expected to generate 0.99 times more return on investment than Chunghwa Precision. However, Aspeed Technology is 1.01 times less risky than Chunghwa Precision. It trades about -0.05 of its potential returns per unit of risk. Chunghwa Precision Test is currently generating about -0.05 per unit of risk. If you would invest  408,500  in Aspeed Technology on December 4, 2024 and sell it today you would lose (47,000) from holding Aspeed Technology or give up 11.51% of portfolio value over 90 days.

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

Aspeed Technology  vs.  Chunghwa Precision Test

Aspeed Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aspeed Technology 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.

Chunghwa Precision Test

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chunghwa Precision Test 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.

Pair Trading with Aspeed Technology and Chunghwa Precision

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

The idea behind Aspeed Technology and Chunghwa Precision Test 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.