Correlation Between Diodes Incorporated and ASE Industrial

Can any of the company-specific risk be diversified away by investing in both Diodes Incorporated and ASE Industrial 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 Diodes Incorporated and ASE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diodes Incorporated and ASE Industrial Holding, you can compare the effects of market volatilities on Diodes Incorporated and ASE Industrial 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 Diodes Incorporated with a short position of ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diodes Incorporated and ASE Industrial.

Diversification Opportunities for Diodes Incorporated and ASE Industrial

0.46

Correlation Coefficient

Diodes Incorporated  ASE Industrial

Very weak diversification

The 3 months correlation between Diodes and ASE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding and Diodes Incorporated 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 Diodes Incorporated are associated (or correlated) with ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and ASE Industrial go up and down completely randomly.

Pair Corralation between Diodes Incorporated and ASE Industrial

Given the investment horizon of 90 days Diodes Incorporated is expected to under-perform the ASE Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Diodes Incorporated is 1.03 times less risky than ASE Industrial. The stock trades about -0.21 of its potential returns per unit of risk. The ASE Industrial Holding is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,055  in ASE Industrial Holding on December 24, 2024 and sell it today you would lose (80.00) from holding ASE Industrial Holding or give up 7.58% of portfolio value over 90 days.

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

Diodes Incorporated  vs.  ASE Industrial Holding

Diodes Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 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.

Pair Trading with Diodes Incorporated and ASE Industrial

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

The idea behind Diodes Incorporated and ASE Industrial Holding 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.