Correlation Between AU Optronics and Allied Motion

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

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

Diversification Opportunities for AU Optronics and Allied Motion

-0.36

Correlation Coefficient

AU Optronics  Allied Motion

Very good diversification

The 3 months correlation between AUOTY and Allied is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics Corp and Allied Motion Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Motion Techno and AU Optronics 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 AU Optronics Corp are associated (or correlated) with Allied Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Motion Techno has no effect on the direction of AU Optronics i.e., AU Optronics and Allied Motion go up and down completely randomly.

Pair Corralation between AU Optronics and Allied Motion

If you would invest  3,917  in Allied Motion Technologies on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Allied Motion Technologies or generate 0.0% return on investment over 90 days.

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

AU Optronics Corp  vs.  Allied Motion Technologies

AU Optronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AU Optronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AU Optronics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Allied Motion Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Motion Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Motion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AU Optronics and Allied Motion

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

The idea behind AU Optronics Corp and Allied Motion 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.