Correlation Between AU Optronics and Fulltech Fiber
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Fulltech Fiber 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 AU Optronics and Fulltech Fiber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Fulltech Fiber Glass, you can compare the effects of market volatilities on AU Optronics and Fulltech Fiber 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 AU Optronics with a short position of Fulltech Fiber. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Fulltech Fiber.
Diversification Opportunities for AU Optronics and Fulltech Fiber
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 2409 and Fulltech is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Fulltech Fiber Glass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulltech Fiber Glass and AU Optronics 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 AU Optronics are associated (or correlated) with Fulltech Fiber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulltech Fiber Glass has no effect on the direction of AU Optronics i.e., AU Optronics and Fulltech Fiber go up and down completely randomly.
Pair Corralation between AU Optronics and Fulltech Fiber
Assuming the 90 days trading horizon AU Optronics is expected to under-perform the Fulltech Fiber. But the stock apears to be less risky and, when comparing its historical volatility, AU Optronics is 1.17 times less risky than Fulltech Fiber. The stock trades about -0.03 of its potential returns per unit of risk. The Fulltech Fiber Glass is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 2,570 in Fulltech Fiber Glass on November 4, 2024 and sell it today you would earn a total of 360.00 from holding Fulltech Fiber Glass or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Fulltech Fiber Glass
Performance |
| Timeline |
| AU Optronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Fulltech Fiber Glass |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
AU Optronics and Fulltech Fiber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Fulltech Fiber
The main advantage of trading using opposite AU Optronics and Fulltech Fiber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Fulltech Fiber 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 Fulltech Fiber will offset losses from the drop in Fulltech Fiber's long position.The idea behind AU Optronics and Fulltech Fiber Glass 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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