Correlation Between Promise Technology and AU Optronics
Can any of the company-specific risk be diversified away by investing in both Promise Technology 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 Promise Technology and AU Optronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Promise Technology and AU Optronics, you can compare the effects of market volatilities on Promise Technology 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 Promise Technology with a short position of AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promise Technology and AU Optronics.
Diversification Opportunities for Promise Technology and AU Optronics
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Promise and 2409 is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Promise Technology and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Promise Technology 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 Promise Technology 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 Promise Technology i.e., Promise Technology and AU Optronics go up and down completely randomly.
Pair Corralation between Promise Technology and AU Optronics
Assuming the 90 days trading horizon Promise Technology is expected to under-perform the AU Optronics. But the stock apears to be less risky and, when comparing its historical volatility, Promise Technology is 1.22 times less risky than AU Optronics. The stock trades about -0.24 of its potential returns per unit of risk. The AU Optronics is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,590 in AU Optronics on September 13, 2024 and sell it today you would lose (15.00) from holding AU Optronics or give up 0.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Promise Technology vs. AU Optronics
Performance |
| Timeline |
| Promise Technology |
| AU Optronics |
Promise Technology and AU Optronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Promise Technology and AU Optronics
The main advantage of trading using opposite Promise Technology and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Promise Technology 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.| Promise Technology vs. AU Optronics | Promise Technology vs. Innolux Corp | Promise Technology vs. Ruentex Development Co | Promise Technology vs. WiseChip Semiconductor |
| AU Optronics vs. Innolux Corp | AU Optronics vs. United Microelectronics | AU Optronics vs. China Steel Corp | AU Optronics vs. Quanta Computer |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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