Correlation Between ASE Industrial and Primax Electronics
Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Primax 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 ASE Industrial and Primax Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASE Industrial Holding and Primax Electronics, you can compare the effects of market volatilities on ASE Industrial and Primax 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 ASE Industrial with a short position of Primax Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Primax Electronics.
Diversification Opportunities for ASE Industrial and Primax Electronics
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ASE and Primax is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Primax Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primax Electronics and ASE Industrial 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 ASE Industrial Holding are associated (or correlated) with Primax Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primax Electronics has no effect on the direction of ASE Industrial i.e., ASE Industrial and Primax Electronics go up and down completely randomly.
Pair Corralation between ASE Industrial and Primax Electronics
Assuming the 90 days trading horizon ASE Industrial is expected to generate 1.22 times less return on investment than Primax Electronics. In addition to that, ASE Industrial is 1.09 times more volatile than Primax Electronics. It trades about 0.04 of its total potential returns per unit of risk. Primax Electronics is currently generating about 0.05 per unit of volatility. If you would invest 6,350 in Primax Electronics on September 4, 2024 and sell it today you would earn a total of 1,640 from holding Primax Electronics or generate 25.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. Primax Electronics
Performance |
| Timeline |
| ASE Industrial Holding |
| Primax Electronics |
ASE Industrial and Primax Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Primax Electronics
The main advantage of trading using opposite ASE Industrial and Primax Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial position performs unexpectedly, Primax 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 Primax Electronics will offset losses from the drop in Primax Electronics' long position.| ASE Industrial vs. Taiwan Semiconductor Manufacturing | ASE Industrial vs. Yang Ming Marine | ASE Industrial vs. AU Optronics | ASE Industrial vs. Nan Ya Plastics |
| Primax Electronics vs. Taiwan Semiconductor Manufacturing | Primax Electronics vs. Yang Ming Marine | Primax Electronics vs. AU Optronics | Primax Electronics vs. Nan Ya Plastics |
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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