Correlation Between Formosa Advanced and AU Optronics
Can any of the company-specific risk be diversified away by investing in both Formosa Advanced and AU Optronics 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 Formosa Advanced and AU Optronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formosa Advanced Technologies and AU Optronics, you can compare the effects of market volatilities on Formosa Advanced and AU Optronics 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 Formosa Advanced with a short position of AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formosa Advanced and AU Optronics.
Diversification Opportunities for Formosa Advanced and AU Optronics
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Formosa and 2409 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Formosa Advanced Technologies and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics and Formosa Advanced 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 Formosa Advanced Technologies are associated (or correlated) with AU Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AU Optronics has no effect on the direction of Formosa Advanced i.e., Formosa Advanced and AU Optronics go up and down completely randomly.
Pair Corralation between Formosa Advanced and AU Optronics
Assuming the 90 days trading horizon Formosa Advanced Technologies is expected to under-perform the AU Optronics. But the stock apears to be less risky and, when comparing its historical volatility, Formosa Advanced Technologies is 2.02 times less risky than AU Optronics. The stock trades about -0.05 of its potential returns per unit of risk. The AU Optronics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,489 in AU Optronics on September 14, 2024 and sell it today you would earn a total of 116.00 from holding AU Optronics or generate 7.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formosa Advanced Technologies vs. AU Optronics
Performance |
| Timeline |
| Formosa Advanced Tec |
| AU Optronics |
Formosa Advanced and AU Optronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formosa Advanced and AU Optronics
The main advantage of trading using opposite Formosa Advanced and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formosa Advanced position performs unexpectedly, AU Optronics 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 AU Optronics will offset losses from the drop in AU Optronics' long position.| Formosa Advanced vs. AU Optronics | Formosa Advanced vs. Innolux Corp | Formosa Advanced vs. Ruentex Development Co | Formosa Advanced vs. WiseChip Semiconductor |
| AU Optronics vs. Innolux Corp | AU Optronics vs. Ruentex Development Co | AU Optronics vs. WiseChip Semiconductor | AU Optronics vs. Novatek Microelectronics 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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