Correlation Between Advanced Energy and Kuo Toong

Can any of the company-specific risk be diversified away by investing in both Advanced Energy and Kuo Toong 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 Advanced Energy and Kuo Toong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advanced Energy Solution and Kuo Toong International, you can compare the effects of market volatilities on Advanced Energy and Kuo Toong 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 Advanced Energy with a short position of Kuo Toong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Kuo Toong.

Diversification Opportunities for Advanced Energy and Kuo Toong

-0.52

Correlation Coefficient

Advanced Energy  Kuo Toong

Excellent diversification

The 3 months correlation between Advanced and Kuo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Solution and Kuo Toong International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuo Toong International and Advanced Energy 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 Advanced Energy Solution are associated (or correlated) with Kuo Toong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuo Toong International has no effect on the direction of Advanced Energy i.e., Advanced Energy and Kuo Toong go up and down completely randomly.

Pair Corralation between Advanced Energy and Kuo Toong

Assuming the 90 days trading horizon Advanced Energy is expected to generate 3.31 times less return on investment than Kuo Toong. In addition to that, Advanced Energy is 1.38 times more volatile than Kuo Toong International. It trades about 0.05 of its total potential returns per unit of risk. Kuo Toong International is currently generating about 0.24 per unit of volatility. If you would invest  5,460  in Kuo Toong International on December 22, 2024 and sell it today you would earn a total of  790.00  from holding Kuo Toong International or generate 14.47% return on investment over 90 days.

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

Advanced Energy Solution  vs.  Kuo Toong International

Advanced Energy Solution

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Kuo Toong International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kuo Toong International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kuo Toong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Energy and Kuo Toong

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

The idea behind Advanced Energy Solution and Kuo Toong International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.