Correlation Between GigaDevice SemiconductorBei and Aurora Optoelectronics

Can any of the company-specific risk be diversified away by investing in both GigaDevice SemiconductorBei and Aurora Optoelectronics 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 GigaDevice SemiconductorBei and Aurora Optoelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GigaDevice SemiconductorBeiji and Aurora Optoelectronics Co, you can compare the effects of market volatilities on GigaDevice SemiconductorBei and Aurora Optoelectronics 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 GigaDevice SemiconductorBei with a short position of Aurora Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaDevice SemiconductorBei and Aurora Optoelectronics.

Diversification Opportunities for GigaDevice SemiconductorBei and Aurora Optoelectronics

0.83

Correlation Coefficient

GigaDevice SemiconductorBei  Aurora Optoelectronics

Very poor diversification

The 3 months correlation between GigaDevice and Aurora is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding GigaDevice SemiconductorBeiji and Aurora Optoelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Optoelectronics and GigaDevice SemiconductorBei 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 GigaDevice SemiconductorBeiji are associated (or correlated) with Aurora Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Optoelectronics has no effect on the direction of GigaDevice SemiconductorBei i.e., GigaDevice SemiconductorBei and Aurora Optoelectronics go up and down completely randomly.

Pair Corralation between GigaDevice SemiconductorBei and Aurora Optoelectronics

Assuming the 90 days trading horizon GigaDevice SemiconductorBei is expected to generate 3.26 times less return on investment than Aurora Optoelectronics. But when comparing it to its historical volatility, GigaDevice SemiconductorBeiji is 1.45 times less risky than Aurora Optoelectronics. It trades about 0.11 of its potential returns per unit of risk. Aurora Optoelectronics Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  142.00  in Aurora Optoelectronics Co on September 5, 2024 and sell it today you would earn a total of  129.00  from holding Aurora Optoelectronics Co or generate 90.85% return on investment over 90 days.

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

GigaDevice SemiconductorBeiji  vs.  Aurora Optoelectronics Co

GigaDevice SemiconductorBei

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GigaDevice SemiconductorBeiji are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GigaDevice SemiconductorBei sustained solid returns over the last few months and may actually be approaching a breakup point.

Aurora Optoelectronics

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Optoelectronics Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurora Optoelectronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GigaDevice SemiconductorBei and Aurora Optoelectronics

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

The idea behind GigaDevice SemiconductorBeiji and Aurora Optoelectronics 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.