Correlation Between Acer and AU Optronics
Can any of the company-specific risk be diversified away by investing in both Acer 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 Acer and AU Optronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Acer Inc and AU Optronics, you can compare the effects of market volatilities on Acer 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 Acer with a short position of AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acer and AU Optronics.
Diversification Opportunities for Acer and AU Optronics
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Acer and 2409 is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Acer Inc and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Acer 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 Acer Inc 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 has no effect on the direction of Acer i.e., Acer and AU Optronics go up and down completely randomly.
Pair Corralation between Acer and AU Optronics
Assuming the 90 days trading horizon Acer Inc is expected to generate 1.17 times more return on investment than AU Optronics. However, Acer is 1.17 times more volatile than AU Optronics. It trades about 0.05 of its potential returns per unit of risk. AU Optronics is currently generating about 0.01 per unit of risk. If you would invest 2,390 in Acer Inc on August 26, 2024 and sell it today you would earn a total of 1,315 from holding Acer Inc or generate 55.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Acer Inc vs. AU Optronics
Performance |
| Timeline |
| Acer Inc |
| AU Optronics |
Acer and AU Optronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Acer and AU Optronics
The main advantage of trading using opposite Acer and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Acer 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 Acer Inc and AU Optronics 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.| AU Optronics vs. Novatek Microelectronics Corp | AU Optronics vs. Quanta Computer | AU Optronics vs. United Microelectronics |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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