Correlation Between Leadtek Research and AU Optronics
Can any of the company-specific risk be diversified away by investing in both Leadtek Research and AU Optronics 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 Leadtek Research and AU Optronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leadtek Research and AU Optronics, you can compare the effects of market volatilities on Leadtek Research and AU Optronics 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 Leadtek Research with a short position of AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leadtek Research and AU Optronics.
Diversification Opportunities for Leadtek Research and AU Optronics
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leadtek and 2409 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Leadtek Research and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Leadtek Research 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 Leadtek Research are associated (or correlated) with AU Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AU Optronics has no effect on the direction of Leadtek Research i.e., Leadtek Research and AU Optronics go up and down completely randomly.
Pair Corralation between Leadtek Research and AU Optronics
Assuming the 90 days trading horizon Leadtek Research is expected to generate 2.23 times more return on investment than AU Optronics. However, Leadtek Research is 2.23 times more volatile than AU Optronics. It trades about 0.03 of its potential returns per unit of risk. AU Optronics is currently generating about 0.01 per unit of risk. If you would invest 6,650 in Leadtek Research on September 14, 2024 and sell it today you would earn a total of 680.00 from holding Leadtek Research or generate 10.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.59% |
| Values | Daily Returns |
Leadtek Research vs. AU Optronics
Performance |
| Timeline |
| Leadtek Research |
| AU Optronics |
Leadtek Research and AU Optronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leadtek Research and AU Optronics
The main advantage of trading using opposite Leadtek Research and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leadtek Research position performs unexpectedly, AU Optronics 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 AU Optronics will offset losses from the drop in AU Optronics' long position.| Leadtek Research vs. AU Optronics | Leadtek Research vs. Innolux Corp | Leadtek Research vs. Ruentex Development Co | Leadtek Research vs. WiseChip Semiconductor |
| AU Optronics vs. Innolux Corp | AU Optronics vs. Ruentex Development Co | AU Optronics vs. WiseChip Semiconductor | AU Optronics vs. Novatek Microelectronics 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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