Correlation Between ABC Taiwan and Ligitek Electronics
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan and Ligitek Electronics 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 ABC Taiwan and Ligitek Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABC Taiwan Electronics and Ligitek Electronics Co, you can compare the effects of market volatilities on ABC Taiwan and Ligitek Electronics 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 ABC Taiwan with a short position of Ligitek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and Ligitek Electronics.
Diversification Opportunities for ABC Taiwan and Ligitek Electronics
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ABC and Ligitek is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics and ABC Taiwan 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 ABC Taiwan Electronics are associated (or correlated) with Ligitek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligitek Electronics has no effect on the direction of ABC Taiwan i.e., ABC Taiwan and Ligitek Electronics go up and down completely randomly.
Pair Corralation between ABC Taiwan and Ligitek Electronics
Assuming the 90 days trading horizon ABC Taiwan Electronics is expected to generate 0.4 times more return on investment than Ligitek Electronics. However, ABC Taiwan Electronics is 2.53 times less risky than Ligitek Electronics. It trades about 0.12 of its potential returns per unit of risk. Ligitek Electronics Co is currently generating about -0.03 per unit of risk. If you would invest 2,205 in ABC Taiwan Electronics on August 30, 2024 and sell it today you would earn a total of 75.00 from holding ABC Taiwan Electronics or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. Ligitek Electronics Co
Performance |
| Timeline |
| ABC Taiwan Electronics |
| Ligitek Electronics |
ABC Taiwan and Ligitek Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and Ligitek Electronics
The main advantage of trading using opposite ABC Taiwan and Ligitek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan position performs unexpectedly, Ligitek Electronics 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 Ligitek Electronics will offset losses from the drop in Ligitek Electronics' long position.| ABC Taiwan vs. Hon Hai Precision | ABC Taiwan vs. Delta Electronics | ABC Taiwan vs. LARGAN Precision Co | ABC Taiwan vs. E Ink Holdings |
| Ligitek Electronics vs. Hon Hai Precision | Ligitek Electronics vs. Delta Electronics | Ligitek Electronics vs. LARGAN Precision Co | Ligitek Electronics vs. E Ink Holdings |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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