Correlation Between ASE Industrial and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both ASE Industrial and Arm Holdings 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 Arm Holdings 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 Arm Holdings plc, you can compare the effects of market volatilities on ASE Industrial and Arm Holdings 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 Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Arm Holdings.
Diversification Opportunities for ASE Industrial and Arm Holdings
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ASE and Arm is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc 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 Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of ASE Industrial i.e., ASE Industrial and Arm Holdings go up and down completely randomly.
Pair Corralation between ASE Industrial and Arm Holdings
Considering the 90-day investment horizon ASE Industrial is expected to generate 2.98 times less return on investment than Arm Holdings. But when comparing it to its historical volatility, ASE Industrial Holding is 2.37 times less risky than Arm Holdings. It trades about 0.06 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,359 in Arm Holdings plc on November 19, 2024 and sell it today you would earn a total of 9,595 from holding Arm Holdings plc or generate 150.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 72.32% |
| Values | Daily Returns |
ASE Industrial Holding vs. Arm Holdings plc
Performance |
| Timeline |
| ASE Industrial Holding |
| Arm Holdings plc |
ASE Industrial and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Arm Holdings
The main advantage of trading using opposite ASE Industrial and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.| ASE Industrial vs. United Microelectronics | ASE Industrial vs. Amkor Technology | ASE Industrial vs. Himax Technologies | ASE Industrial vs. Chunghwa Telecom Co |
| Arm Holdings vs. Summit Environmental | Arm Holdings vs. Simply Good Foods | Arm Holdings vs. ArcelorMittal SA ADR | Arm Holdings vs. HUHUTECH International Group |
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 Stocks Directory module to find actively traded stocks across global markets.
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