Correlation Between AU Optronics and Elite Material
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Elite Material 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 Elite Material into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Elite Material Co, you can compare the effects of market volatilities on AU Optronics and Elite Material 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 Elite Material. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Elite Material.
Diversification Opportunities for AU Optronics and Elite Material
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 2409 and Elite is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material 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 Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of AU Optronics i.e., AU Optronics and Elite Material go up and down completely randomly.
Pair Corralation between AU Optronics and Elite Material
Assuming the 90 days trading horizon AU Optronics is expected to under-perform the Elite Material. But the stock apears to be less risky and, when comparing its historical volatility, AU Optronics is 1.64 times less risky than Elite Material. The stock trades about -0.01 of its potential returns per unit of risk. The Elite Material Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 23,050 in Elite Material Co on August 31, 2024 and sell it today you would earn a total of 23,800 from holding Elite Material Co or generate 103.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Elite Material Co
Performance |
| Timeline |
| AU Optronics |
| Elite Material |
AU Optronics and Elite Material Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Elite Material
The main advantage of trading using opposite AU Optronics and Elite Material positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Elite Material 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 Elite Material will offset losses from the drop in Elite Material's long position.| AU Optronics vs. Innolux Corp | AU Optronics vs. United Microelectronics | AU Optronics vs. China Steel Corp | AU Optronics vs. Quanta Computer |
| Elite Material vs. Compeq Manufacturing Co | Elite Material vs. ITEQ Corp | Elite Material vs. Unimicron Technology Corp | Elite Material vs. Chicony Electronics Co |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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