Correlation Between AU Optronics and Leatec Fine
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Leatec Fine 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 Leatec Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Leatec Fine Ceramics, you can compare the effects of market volatilities on AU Optronics and Leatec Fine 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 Leatec Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Leatec Fine.
Diversification Opportunities for AU Optronics and Leatec Fine
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 2409 and Leatec is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics 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 Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of AU Optronics i.e., AU Optronics and Leatec Fine go up and down completely randomly.
Pair Corralation between AU Optronics and Leatec Fine
Assuming the 90 days trading horizon AU Optronics is expected to generate 1.13 times more return on investment than Leatec Fine. However, AU Optronics is 1.13 times more volatile than Leatec Fine Ceramics. It trades about -0.23 of its potential returns per unit of risk. Leatec Fine Ceramics is currently generating about -0.37 per unit of risk. If you would invest 1,450 in AU Optronics on November 7, 2024 and sell it today you would lose (100.00) from holding AU Optronics or give up 6.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Leatec Fine Ceramics
Performance |
| Timeline |
| AU Optronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Leatec Fine Ceramics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
AU Optronics and Leatec Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Leatec Fine
The main advantage of trading using opposite AU Optronics and Leatec Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Leatec Fine 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 Leatec Fine will offset losses from the drop in Leatec Fine's long position.The idea behind AU Optronics and Leatec Fine Ceramics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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