Correlation Between ASE Industrial and Analog Devices

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

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

Diversification Opportunities for ASE Industrial and Analog Devices

0.56

Correlation Coefficient

ASE Industrial  Analog Devices

Very weak diversification

The 3 months correlation between ASE and Analog is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and ASE Industrial 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 ASE Industrial Holding are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of ASE Industrial i.e., ASE Industrial and Analog Devices go up and down completely randomly.

Pair Corralation between ASE Industrial and Analog Devices

Considering the 90-day investment horizon ASE Industrial is expected to generate 1.5 times less return on investment than Analog Devices. In addition to that, ASE Industrial is 1.21 times more volatile than Analog Devices. It trades about 0.02 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.04 per unit of volatility. If you would invest  22,218  in Analog Devices on December 1, 2024 and sell it today you would earn a total of  788.00  from holding Analog Devices or generate 3.55% return on investment over 90 days.

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

ASE Industrial Holding  vs.  Analog Devices

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 strong basic indicators, ASE Industrial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Analog Devices

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ASE Industrial and Analog Devices

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

The idea behind ASE Industrial Holding and Analog Devices 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.