Correlation Between ASE Industrial and RF Acquisition

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

Diversification Opportunities for ASE Industrial and RF Acquisition

0.05

Correlation Coefficient

ASE Industrial  RF Acquisition

Significant diversification

The 3 months correlation between ASE and RFAIR is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and RF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Acquisition Corp 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 RF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Acquisition Corp has no effect on the direction of ASE Industrial i.e., ASE Industrial and RF Acquisition go up and down completely randomly.

Pair Corralation between ASE Industrial and RF Acquisition

Considering the 90-day investment horizon ASE Industrial is expected to generate 1.19 times less return on investment than RF Acquisition. But when comparing it to its historical volatility, ASE Industrial Holding is 2.93 times less risky than RF Acquisition. It trades about 0.07 of its potential returns per unit of risk. RF Acquisition Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6.02  in RF Acquisition Corp on October 27, 2024 and sell it today you would lose (0.02) from holding RF Acquisition Corp or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

ASE Industrial Holding  vs.  RF Acquisition Corp

ASE Industrial Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RF Acquisition Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RF Acquisition Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward indicators, RF Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ASE Industrial and RF Acquisition

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

The idea behind ASE Industrial Holding and RF Acquisition Corp 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.