Correlation Between AU Optronics and Elan Microelectronics
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Elan Microelectronics 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 Elan Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Elan Microelectronics Corp, you can compare the effects of market volatilities on AU Optronics and Elan Microelectronics 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 Elan Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Elan Microelectronics.
Diversification Opportunities for AU Optronics and Elan Microelectronics
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between 2409 and Elan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Elan Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elan Microelectronics 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 Elan Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elan Microelectronics has no effect on the direction of AU Optronics i.e., AU Optronics and Elan Microelectronics go up and down completely randomly.
Pair Corralation between AU Optronics and Elan Microelectronics
Assuming the 90 days trading horizon AU Optronics is expected to generate 5.45 times less return on investment than Elan Microelectronics. But when comparing it to its historical volatility, AU Optronics is 1.11 times less risky than Elan Microelectronics. It trades about 0.01 of its potential returns per unit of risk. Elan Microelectronics Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,559 in Elan Microelectronics Corp on September 4, 2024 and sell it today you would earn a total of 6,091 from holding Elan Microelectronics Corp or generate 71.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
AU Optronics vs. Elan Microelectronics Corp
Performance |
| Timeline |
| AU Optronics |
| Elan Microelectronics |
AU Optronics and Elan Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Elan Microelectronics
The main advantage of trading using opposite AU Optronics and Elan Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Elan Microelectronics 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 Elan Microelectronics will offset losses from the drop in Elan Microelectronics' long position.| AU Optronics vs. Innolux Corp | AU Optronics vs. United Microelectronics | AU Optronics vs. China Steel Corp | AU Optronics vs. Quanta Computer |
| Elan Microelectronics vs. Taiwan Semiconductor Manufacturing | Elan Microelectronics vs. Yang Ming Marine | Elan Microelectronics vs. AU Optronics | Elan Microelectronics vs. Innolux Corp |
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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