Correlation Between Marketech International and AU Optronics

Can any of the company-specific risk be diversified away by investing in both Marketech International and AU Optronics 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 Marketech International and AU Optronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marketech International Corp and AU Optronics, you can compare the effects of market volatilities on Marketech International and AU Optronics 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 Marketech International with a short position of AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marketech International and AU Optronics.

Diversification Opportunities for Marketech International and AU Optronics

0.69

Correlation Coefficient

Marketech International  AU Optronics

Poor diversification

The 3 months correlation between Marketech and 2409 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Marketech International Corp and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Marketech International 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 Marketech International Corp are associated (or correlated) with AU Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AU Optronics has no effect on the direction of Marketech International i.e., Marketech International and AU Optronics go up and down completely randomly.

Pair Corralation between Marketech International and AU Optronics

Assuming the 90 days trading horizon Marketech International Corp is expected to generate 0.83 times more return on investment than AU Optronics. However, Marketech International Corp is 1.21 times less risky than AU Optronics. It trades about -0.06 of its potential returns per unit of risk. AU Optronics is currently generating about -0.1 per unit of risk. If you would invest  15,350  in Marketech International Corp on September 19, 2024 and sell it today you would lose (700.00) from holding Marketech International Corp or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Marketech International Corp  vs.  AU Optronics

Marketech International

Risk-Adjusted Performance

0 of 100

Very Weak

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

AU Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AU Optronics 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 Marketech International and AU Optronics

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

The idea behind Marketech International Corp and AU Optronics 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.