Correlation Between Leader Electronics and AU Optronics
Can any of the company-specific risk be diversified away by investing in both Leader Electronics 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 Leader Electronics and AU Optronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and AU Optronics, you can compare the effects of market volatilities on Leader Electronics 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 Leader Electronics with a short position of AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and AU Optronics.
Diversification Opportunities for Leader Electronics and AU Optronics
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leader and 2409 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Leader Electronics 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 Leader Electronics 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 Leader Electronics i.e., Leader Electronics and AU Optronics go up and down completely randomly.
Pair Corralation between Leader Electronics and AU Optronics
Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the AU Optronics. In addition to that, Leader Electronics is 1.3 times more volatile than AU Optronics. It trades about -0.02 of its total potential returns per unit of risk. AU Optronics is currently generating about 0.0 per unit of volatility. If you would invest 1,640 in AU Optronics on September 14, 2024 and sell it today you would lose (65.00) from holding AU Optronics or give up 3.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leader Electronics vs. AU Optronics
Performance |
| Timeline |
| Leader Electronics |
| AU Optronics |
Leader Electronics and AU Optronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leader Electronics and AU Optronics
The main advantage of trading using opposite Leader Electronics and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics 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.| Leader Electronics vs. Yang Ming Marine | Leader Electronics vs. Wan Hai Lines | Leader Electronics vs. U Ming Marine Transport | Leader Electronics vs. Taiwan Navigation Co |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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