Correlation Between Te Chang and Asustek Computer

Can any of the company-specific risk be diversified away by investing in both Te Chang and Asustek Computer 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 Te Chang and Asustek Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Te Chang Construction and Asustek Computer, you can compare the effects of market volatilities on Te Chang and Asustek Computer 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 Te Chang with a short position of Asustek Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Te Chang and Asustek Computer.

Diversification Opportunities for Te Chang and Asustek Computer

0.6

Correlation Coefficient

Te Chang  Asustek Computer

Poor diversification

The 3 months correlation between 5511 and Asustek is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Asustek Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asustek Computer and Te Chang 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 Te Chang Construction are associated (or correlated) with Asustek Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asustek Computer has no effect on the direction of Te Chang i.e., Te Chang and Asustek Computer go up and down completely randomly.

Pair Corralation between Te Chang and Asustek Computer

Assuming the 90 days trading horizon Te Chang is expected to generate 27.79 times less return on investment than Asustek Computer. But when comparing it to its historical volatility, Te Chang Construction is 2.27 times less risky than Asustek Computer. It trades about 0.0 of its potential returns per unit of risk. Asustek Computer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  61,500  in Asustek Computer on December 22, 2024 and sell it today you would earn a total of  3,500  from holding Asustek Computer or generate 5.69% return on investment over 90 days.

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

Te Chang Construction  vs.  Asustek Computer

Te Chang Construction

Risk-Adjusted Performance

Very Weak

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

Asustek Computer

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Te Chang and Asustek Computer

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

The idea behind Te Chang Construction and Asustek Computer 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.