Correlation Between LGL and AU Optronics

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

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

Diversification Opportunities for LGL and AU Optronics

0.0

Correlation Coefficient

LGL  AU Optronics

Pay attention - limited upside

The 3 months correlation between LGL and AUOTY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LGL Group and AU Optronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics Corp and LGL 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 LGL Group are associated (or correlated) with AU Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AU Optronics Corp has no effect on the direction of LGL i.e., LGL and AU Optronics go up and down completely randomly.

Pair Corralation between LGL and AU Optronics

If you would invest  589.00  in LGL Group on December 26, 2024 and sell it today you would earn a total of  61.00  from holding LGL Group or generate 10.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LGL Group  vs.  AU Optronics Corp

LGL Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LGL Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, LGL disclosed solid returns over the last few months and may actually be approaching a breakup point.

AU Optronics Corp

Risk-Adjusted Performance

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.

Pair Trading with LGL and AU Optronics

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

The idea behind LGL Group and AU Optronics 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.