Correlation Between AU Optronics and LGL

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

Diversification Opportunities for AU Optronics and LGL

0.12

Correlation Coefficient

AU Optronics  LGL

Average diversification

The 3 months correlation between AUOTY and LGL is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics Corp and LGL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGL Group 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 LGL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGL Group has no effect on the direction of AU Optronics i.e., AU Optronics and LGL go up and down completely randomly.

Pair Corralation between AU Optronics and LGL

Assuming the 90 days horizon AU Optronics Corp is expected to generate 0.72 times more return on investment than LGL. However, AU Optronics Corp is 1.4 times less risky than LGL. It trades about 0.34 of its potential returns per unit of risk. LGL Group is currently generating about 0.05 per unit of risk. If you would invest  489.00  in AU Optronics Corp on September 17, 2024 and sell it today you would earn a total of  101.00  from holding AU Optronics Corp or generate 20.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	6.26%
Values	Daily Returns

AU Optronics Corp  vs.  LGL Group

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.

LGL Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LGL Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, LGL is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with AU Optronics and LGL

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

The idea behind AU Optronics Corp and LGL Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.