Correlation Between ASE Industrial and Globalfoundries

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

Diversification Opportunities for ASE Industrial and Globalfoundries

0.72

Correlation Coefficient

ASE Industrial  Globalfoundries

Poor diversification

The 3 months correlation between ASE and Globalfoundries is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of ASE Industrial i.e., ASE Industrial and Globalfoundries go up and down completely randomly.

Pair Corralation between ASE Industrial and Globalfoundries

Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.98 times more return on investment than Globalfoundries. However, ASE Industrial Holding is 1.02 times less risky than Globalfoundries. It trades about -0.07 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.08 per unit of risk. If you would invest  1,015  in ASE Industrial Holding on December 30, 2024 and sell it today you would lose (135.00) from holding ASE Industrial Holding or give up 13.3% of portfolio value over 90 days.

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

ASE Industrial Holding  vs.  Globalfoundries

ASE Industrial Holding

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Globalfoundries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ASE Industrial and Globalfoundries

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

The idea behind ASE Industrial Holding and Globalfoundries 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.