Correlation Between ASE Industrial and Diodes Incorporated

Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Diodes Incorporated 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 Diodes Incorporated 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 Diodes Incorporated, you can compare the effects of market volatilities on ASE Industrial and Diodes Incorporated 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 Diodes Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Diodes Incorporated.

Diversification Opportunities for ASE Industrial and Diodes Incorporated

0.38

Correlation Coefficient

ASE Industrial  Diodes Incorporated

Weak diversification

The 3 months correlation between ASE and Diodes is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated 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 Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of ASE Industrial i.e., ASE Industrial and Diodes Incorporated go up and down completely randomly.

Pair Corralation between ASE Industrial and Diodes Incorporated

Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.75 times more return on investment than Diodes Incorporated. However, ASE Industrial Holding is 1.33 times less risky than Diodes Incorporated. It trades about -0.02 of its potential returns per unit of risk. Diodes Incorporated is currently generating about -0.02 per unit of risk. If you would invest  1,114  in ASE Industrial Holding on September 23, 2024 and sell it today you would lose (114.00) from holding ASE Industrial Holding or give up 10.23% of portfolio value over 90 days.

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

ASE Industrial Holding  vs.  Diodes Incorporated

ASE Industrial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASE Industrial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Diodes Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ASE Industrial and Diodes Incorporated

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

The idea behind ASE Industrial Holding and Diodes Incorporated 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.