Correlation Between Asustek Computer and U Media
Can any of the company-specific risk be diversified away by investing in both Asustek Computer and U Media 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 Asustek Computer and U Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asustek Computer and U Media Communications, you can compare the effects of market volatilities on Asustek Computer and U Media 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 Asustek Computer with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asustek Computer and U Media.
Diversification Opportunities for Asustek Computer and U Media
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Asustek and 6470 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Asustek Computer and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and Asustek Computer 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 Asustek Computer are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Asustek Computer i.e., Asustek Computer and U Media go up and down completely randomly.
Pair Corralation between Asustek Computer and U Media
Assuming the 90 days trading horizon Asustek Computer is expected to generate 1.05 times more return on investment than U Media. However, Asustek Computer is 1.05 times more volatile than U Media Communications. It trades about 0.06 of its potential returns per unit of risk. U Media Communications is currently generating about -0.03 per unit of risk. If you would invest 46,400 in Asustek Computer on November 5, 2024 and sell it today you would earn a total of 14,300 from holding Asustek Computer or generate 30.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asustek Computer vs. U Media Communications
Performance |
| Timeline |
| Asustek Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| U Media Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Asustek Computer and U Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asustek Computer and U Media
The main advantage of trading using opposite Asustek Computer and U Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asustek Computer position performs unexpectedly, U Media 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 U Media will offset losses from the drop in U Media's long position.The idea behind Asustek Computer and U Media Communications 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.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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