Correlation Between AU Optronics and Promise Technology
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Promise Technology 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 Promise Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Promise Technology, you can compare the effects of market volatilities on AU Optronics and Promise Technology 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 Promise Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Promise Technology.
Diversification Opportunities for AU Optronics and Promise Technology
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 2409 and Promise is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Promise Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promise Technology 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 Promise Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promise Technology has no effect on the direction of AU Optronics i.e., AU Optronics and Promise Technology go up and down completely randomly.
Pair Corralation between AU Optronics and Promise Technology
Assuming the 90 days trading horizon AU Optronics is expected to generate 2.21 times less return on investment than Promise Technology. But when comparing it to its historical volatility, AU Optronics is 1.34 times less risky than Promise Technology. It trades about 0.02 of its potential returns per unit of risk. Promise Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,010 in Promise Technology on September 12, 2024 and sell it today you would earn a total of 185.00 from holding Promise Technology or generate 18.32% 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. Promise Technology
Performance |
| Timeline |
| AU Optronics |
| Promise Technology |
AU Optronics and Promise Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Promise Technology
The main advantage of trading using opposite AU Optronics and Promise Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Promise Technology 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 Promise Technology will offset losses from the drop in Promise Technology's long position.| AU Optronics vs. Innolux Corp | AU Optronics vs. Ruentex Development Co | AU Optronics vs. WiseChip Semiconductor | AU Optronics vs. Novatek Microelectronics Corp |
| Promise Technology vs. AU Optronics | Promise Technology vs. Innolux Corp | Promise Technology vs. Ruentex Development Co | Promise Technology vs. WiseChip Semiconductor |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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