Correlation Between Alpha and ChipMOS Technologies

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

By analyzing existing cross correlation between Alpha and Omega and ChipMOS Technologies, you can compare the effects of market volatilities on Alpha and ChipMOS Technologies 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 Alpha with a short position of ChipMOS Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha and ChipMOS Technologies.

Diversification Opportunities for Alpha and ChipMOS Technologies

-0.32

Correlation Coefficient

Alpha  ChipMOS Technologies

Very good diversification

The 3 months correlation between Alpha and ChipMOS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and ChipMOS Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChipMOS Technologies and Alpha 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 Alpha and Omega are associated (or correlated) with ChipMOS Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChipMOS Technologies has no effect on the direction of Alpha i.e., Alpha and ChipMOS Technologies go up and down completely randomly.

Pair Corralation between Alpha and ChipMOS Technologies

Given the investment horizon of 90 days Alpha and Omega is expected to generate 4.42 times more return on investment than ChipMOS Technologies. However, Alpha is 4.42 times more volatile than ChipMOS Technologies. It trades about -0.01 of its potential returns per unit of risk. ChipMOS Technologies is currently generating about -0.14 per unit of risk. If you would invest  4,036  in Alpha and Omega on September 24, 2024 and sell it today you would lose (205.00) from holding Alpha and Omega or give up 5.08% of portfolio value over 90 days.

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

Alpha and Omega  vs.  ChipMOS Technologies

Alpha and Omega

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChipMOS Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alpha and ChipMOS Technologies

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

The idea behind Alpha and Omega and ChipMOS Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.