Correlation Between Giant Manufacturing and AU Optronics

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

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

Diversification Opportunities for Giant Manufacturing and AU Optronics

0.62

Correlation Coefficient

Giant Manufacturing  AU Optronics

Poor diversification

The 3 months correlation between Giant and 2409 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Giant Manufacturing 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 Giant Manufacturing Co 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 Giant Manufacturing i.e., Giant Manufacturing and AU Optronics go up and down completely randomly.

Pair Corralation between Giant Manufacturing and AU Optronics

Assuming the 90 days trading horizon Giant Manufacturing Co is expected to generate 1.17 times more return on investment than AU Optronics. However, Giant Manufacturing is 1.17 times more volatile than AU Optronics. It trades about 0.02 of its potential returns per unit of risk. AU Optronics is currently generating about -0.03 per unit of risk. If you would invest  14,300  in Giant Manufacturing Co on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Giant Manufacturing Co or generate 0.7% return on investment over 90 days.

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

Giant Manufacturing Co  vs.  AU Optronics

Giant Manufacturing

Risk-Adjusted Performance

Weak

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

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 fairly stable basic indicators, AU Optronics 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 Giant Manufacturing and AU Optronics

The main advantage of trading using opposite Giant Manufacturing and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Giant Manufacturing 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 Giant Manufacturing Co 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.