Correlation Between AU Optronics and Weltrend Semiconductor
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Weltrend Semiconductor 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 Weltrend Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Weltrend Semiconductor, you can compare the effects of market volatilities on AU Optronics and Weltrend Semiconductor 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 Weltrend Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Weltrend Semiconductor.
Diversification Opportunities for AU Optronics and Weltrend Semiconductor
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 2409 and Weltrend is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Weltrend Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weltrend Semiconductor 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 Weltrend Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weltrend Semiconductor has no effect on the direction of AU Optronics i.e., AU Optronics and Weltrend Semiconductor go up and down completely randomly.
Pair Corralation between AU Optronics and Weltrend Semiconductor
Assuming the 90 days trading horizon AU Optronics is expected to under-perform the Weltrend Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, AU Optronics is 1.31 times less risky than Weltrend Semiconductor. The stock trades about -0.04 of its potential returns per unit of risk. The Weltrend Semiconductor is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 6,990 in Weltrend Semiconductor on October 22, 2024 and sell it today you would lose (1,360) from holding Weltrend Semiconductor or give up 19.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Weltrend Semiconductor
Performance |
| Timeline |
| AU Optronics |
| Weltrend Semiconductor |
AU Optronics and Weltrend Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Weltrend Semiconductor
The main advantage of trading using opposite AU Optronics and Weltrend Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Weltrend Semiconductor 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 Weltrend Semiconductor will offset losses from the drop in Weltrend Semiconductor's long position.| AU Optronics vs. Innolux Corp | AU Optronics vs. United Microelectronics | AU Optronics vs. China Steel Corp | AU Optronics vs. Quanta Computer |
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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