Correlation Between ASE Industrial and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Cheng Mei 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 Cheng Mei 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 Cheng Mei Materials, you can compare the effects of market volatilities on ASE Industrial and Cheng Mei 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 Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Cheng Mei.
Diversification Opportunities for ASE Industrial and Cheng Mei
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between ASE and Cheng is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials 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 Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of ASE Industrial i.e., ASE Industrial and Cheng Mei go up and down completely randomly.
Pair Corralation between ASE Industrial and Cheng Mei
Assuming the 90 days trading horizon ASE Industrial Holding is expected to generate 1.06 times more return on investment than Cheng Mei. However, ASE Industrial is 1.06 times more volatile than Cheng Mei Materials. It trades about 0.04 of its potential returns per unit of risk. Cheng Mei Materials is currently generating about 0.01 per unit of risk. If you would invest 13,100 in ASE Industrial Holding on September 4, 2024 and sell it today you would earn a total of 2,350 from holding ASE Industrial Holding or generate 17.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. Cheng Mei Materials
Performance |
| Timeline |
| ASE Industrial Holding |
| Cheng Mei Materials |
ASE Industrial and Cheng Mei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Cheng Mei
The main advantage of trading using opposite ASE Industrial and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial position performs unexpectedly, Cheng Mei 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 Cheng Mei will offset losses from the drop in Cheng Mei's long position.| ASE Industrial vs. Taiwan Semiconductor Manufacturing | ASE Industrial vs. Yang Ming Marine | ASE Industrial vs. AU Optronics | ASE Industrial vs. Innolux Corp |
| Cheng Mei vs. Taiwan Semiconductor Manufacturing | Cheng Mei vs. Yang Ming Marine | Cheng Mei vs. AU Optronics | Cheng Mei vs. Innolux 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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