Correlation Between ASE Industrial and ADLINK Technology
Can any of the company-specific risk be diversified away by investing in both ASE Industrial and ADLINK Technology 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 ADLINK Technology 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 ADLINK Technology, you can compare the effects of market volatilities on ASE Industrial and ADLINK Technology 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 ADLINK Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and ADLINK Technology.
Diversification Opportunities for ASE Industrial and ADLINK Technology
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ASE and ADLINK is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and ADLINK Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADLINK Technology 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 ADLINK Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADLINK Technology has no effect on the direction of ASE Industrial i.e., ASE Industrial and ADLINK Technology go up and down completely randomly.
Pair Corralation between ASE Industrial and ADLINK Technology
Assuming the 90 days trading horizon ASE Industrial is expected to generate 1.99 times less return on investment than ADLINK Technology. But when comparing it to its historical volatility, ASE Industrial Holding is 1.1 times less risky than ADLINK Technology. It trades about 0.04 of its potential returns per unit of risk. ADLINK Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,150 in ADLINK Technology on September 4, 2024 and sell it today you would earn a total of 210.00 from holding ADLINK Technology or generate 2.94% 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. ADLINK Technology
Performance |
| Timeline |
| ASE Industrial Holding |
| ADLINK Technology |
ASE Industrial and ADLINK Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and ADLINK Technology
The main advantage of trading using opposite ASE Industrial and ADLINK Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial position performs unexpectedly, ADLINK Technology 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 ADLINK Technology will offset losses from the drop in ADLINK Technology'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 |
| ADLINK Technology vs. Taiwan Semiconductor Manufacturing | ADLINK Technology vs. Yang Ming Marine | ADLINK Technology vs. AU Optronics | ADLINK Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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