Correlation Between AAEON Technology and Formosa Optical
Can any of the company-specific risk be diversified away by investing in both AAEON Technology and Formosa Optical 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 AAEON Technology and Formosa Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAEON Technology and Formosa Optical Technology, you can compare the effects of market volatilities on AAEON Technology and Formosa Optical 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 AAEON Technology with a short position of Formosa Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAEON Technology and Formosa Optical.
Diversification Opportunities for AAEON Technology and Formosa Optical
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between AAEON and Formosa is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding AAEON Technology and Formosa Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Optical Tech and AAEON Technology 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 AAEON Technology are associated (or correlated) with Formosa Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Optical Tech has no effect on the direction of AAEON Technology i.e., AAEON Technology and Formosa Optical go up and down completely randomly.
Pair Corralation between AAEON Technology and Formosa Optical
Assuming the 90 days trading horizon AAEON Technology is expected to generate 1.29 times less return on investment than Formosa Optical. In addition to that, AAEON Technology is 1.11 times more volatile than Formosa Optical Technology. It trades about 0.19 of its total potential returns per unit of risk. Formosa Optical Technology is currently generating about 0.28 per unit of volatility. If you would invest 10,500 in Formosa Optical Technology on September 13, 2024 and sell it today you would earn a total of 700.00 from holding Formosa Optical Technology or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAEON Technology vs. Formosa Optical Technology
Performance |
| Timeline |
| AAEON Technology |
| Formosa Optical Tech |
AAEON Technology and Formosa Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAEON Technology and Formosa Optical
The main advantage of trading using opposite AAEON Technology and Formosa Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAEON Technology position performs unexpectedly, Formosa Optical 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 Formosa Optical will offset losses from the drop in Formosa Optical's long position.| AAEON Technology vs. Qisda Corp | AAEON Technology vs. Quanta Computer | AAEON Technology vs. Wistron Corp | AAEON Technology vs. Delta Electronics |
| Formosa Optical vs. Quanta Storage | Formosa Optical vs. Wistron Information Technology | Formosa Optical vs. Asia Metal Industries | Formosa Optical vs. Great China Metal |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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