Correlation Between Powertech Technology and ASE Industrial

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

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

Diversification Opportunities for Powertech Technology and ASE Industrial

0.19

Correlation Coefficient

Powertech Technology  ASE Industrial

Average diversification

The 3 months correlation between Powertech and ASE is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Powertech Technology and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding and Powertech 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 Powertech Technology are associated (or correlated) with ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Powertech Technology i.e., Powertech Technology and ASE Industrial go up and down completely randomly.

Pair Corralation between Powertech Technology and ASE Industrial

Assuming the 90 days trading horizon Powertech Technology is expected to generate 1.03 times more return on investment than ASE Industrial. However, Powertech Technology is 1.03 times more volatile than ASE Industrial Holding. It trades about 0.08 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.02 per unit of risk. If you would invest  12,450  in Powertech Technology on December 21, 2024 and sell it today you would earn a total of  1,250  from holding Powertech Technology or generate 10.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Powertech Technology  vs.  ASE Industrial Holding

Powertech Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Powertech Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Powertech Technology showed solid returns over the last few months and may actually be approaching a breakup point.

ASE Industrial Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ASE Industrial 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 Powertech Technology and ASE Industrial

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

The idea behind Powertech Technology and ASE Industrial Holding 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.