Correlation Between AU Optronics and Quanta Computer
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Quanta Computer 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 Quanta Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Quanta Computer, you can compare the effects of market volatilities on AU Optronics and Quanta Computer 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 Quanta Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Quanta Computer.
Diversification Opportunities for AU Optronics and Quanta Computer
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 2409 and Quanta is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Quanta Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Computer 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 Quanta Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Computer has no effect on the direction of AU Optronics i.e., AU Optronics and Quanta Computer go up and down completely randomly.
Pair Corralation between AU Optronics and Quanta Computer
Assuming the 90 days trading horizon AU Optronics is expected to under-perform the Quanta Computer. But the stock apears to be less risky and, when comparing its historical volatility, AU Optronics is 1.22 times less risky than Quanta Computer. The stock trades about -0.19 of its potential returns per unit of risk. The Quanta Computer is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 30,300 in Quanta Computer on August 30, 2024 and sell it today you would lose (1,650) from holding Quanta Computer or give up 5.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Quanta Computer
Performance |
| Timeline |
| AU Optronics |
| Quanta Computer |
AU Optronics and Quanta Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Quanta Computer
The main advantage of trading using opposite AU Optronics and Quanta Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Quanta Computer 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 Quanta Computer will offset losses from the drop in Quanta Computer's long position.The idea behind AU Optronics and Quanta Computer 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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