Correlation Between ChipMOS Technologies and Diodes Incorporated

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

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

Diversification Opportunities for ChipMOS Technologies and Diodes Incorporated

0.23

Correlation Coefficient

ChipMOS Technologies  Diodes Incorporated

Modest diversification

The 3 months correlation between ChipMOS and Diodes is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ChipMOS Technologies and Diodes Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diodes Incorporated and ChipMOS Technologies 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 ChipMOS Technologies are associated (or correlated) with Diodes Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diodes Incorporated has no effect on the direction of ChipMOS Technologies i.e., ChipMOS Technologies and Diodes Incorporated go up and down completely randomly.

Pair Corralation between ChipMOS Technologies and Diodes Incorporated

Given the investment horizon of 90 days ChipMOS Technologies is expected to under-perform the Diodes Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, ChipMOS Technologies is 2.01 times less risky than Diodes Incorporated. The stock trades about -0.07 of its potential returns per unit of risk. The Diodes Incorporated is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,131  in Diodes Incorporated on September 23, 2024 and sell it today you would earn a total of  25.00  from holding Diodes Incorporated or generate 0.41% return on investment over 90 days.

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

ChipMOS Technologies  vs.  Diodes Incorporated

ChipMOS Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Diodes Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ChipMOS Technologies and Diodes Incorporated

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

The idea behind ChipMOS Technologies and Diodes Incorporated 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.