Correlation Between AU Optronics and Formosa Advanced
Can any of the company-specific risk be diversified away by investing in both AU Optronics and Formosa Advanced 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 Formosa Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AU Optronics and Formosa Advanced Technologies, you can compare the effects of market volatilities on AU Optronics and Formosa Advanced 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 Formosa Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of AU Optronics and Formosa Advanced.
Diversification Opportunities for AU Optronics and Formosa Advanced
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between 2409 and Formosa is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Formosa Advanced Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Advanced Tec 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 Formosa Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Advanced Tec has no effect on the direction of AU Optronics i.e., AU Optronics and Formosa Advanced go up and down completely randomly.
Pair Corralation between AU Optronics and Formosa Advanced
Assuming the 90 days trading horizon AU Optronics is expected to under-perform the Formosa Advanced. In addition to that, AU Optronics is 1.62 times more volatile than Formosa Advanced Technologies. It trades about -0.15 of its total potential returns per unit of risk. Formosa Advanced Technologies is currently generating about 0.04 per unit of volatility. If you would invest 2,840 in Formosa Advanced Technologies on October 20, 2024 and sell it today you would earn a total of 30.00 from holding Formosa Advanced Technologies or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AU Optronics vs. Formosa Advanced Technologies
Performance |
| Timeline |
| AU Optronics |
| Formosa Advanced Tec |
AU Optronics and Formosa Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AU Optronics and Formosa Advanced
The main advantage of trading using opposite AU Optronics and Formosa Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AU Optronics position performs unexpectedly, Formosa Advanced 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 Formosa Advanced will offset losses from the drop in Formosa Advanced's long position.| AU Optronics vs. Innolux Corp | AU Optronics vs. United Microelectronics | AU Optronics vs. China Steel Corp | AU Optronics vs. Quanta Computer |
| Formosa Advanced vs. Powertech Technology | Formosa Advanced vs. Greatek Electronics | Formosa Advanced vs. Sigurd Microelectronics Corp | Formosa Advanced vs. King Yuan Electronics |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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