Correlation Between AU Optronics and Test Research
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Test Research 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 Test Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Test Research, you can compare the effects of market volatilities on AU Optronics and Test Research 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 Test Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Test Research.
Diversification Opportunities for AU Optronics and Test Research
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 2409 and Test is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Test Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Test Research 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 Test Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Test Research has no effect on the direction of AU Optronics i.e., AU Optronics and Test Research go up and down completely randomly.
Pair Corralation between AU Optronics and Test Research
Assuming the 90 days trading horizon AU Optronics is expected to generate 5.89 times less return on investment than Test Research. But when comparing it to its historical volatility, AU Optronics is 1.23 times less risky than Test Research. It trades about 0.02 of its potential returns per unit of risk. Test Research is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,560 in Test Research on September 3, 2024 and sell it today you would earn a total of 6,440 from holding Test Research or generate 98.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Test Research
Performance |
| Timeline |
| AU Optronics |
| Test Research |
AU Optronics and Test Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Test Research
The main advantage of trading using opposite AU Optronics and Test Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Test Research 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 Test Research will offset losses from the drop in Test Research's long position.| AU Optronics vs. Innolux Corp | AU Optronics vs. United Microelectronics | AU Optronics vs. China Steel Corp | AU Optronics vs. Quanta Computer |
| Test Research vs. Taiwan Semiconductor Manufacturing | Test Research vs. Yang Ming Marine | Test Research vs. ASE Industrial Holding | Test Research vs. AU Optronics |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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