Correlation Between Advantech and Asustek Computer

Can any of the company-specific risk be diversified away by investing in both Advantech and Asustek Computer 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 Advantech and Asustek Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advantech Co and Asustek Computer, you can compare the effects of market volatilities on Advantech and Asustek Computer 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 Advantech with a short position of Asustek Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Asustek Computer.

Diversification Opportunities for Advantech and Asustek Computer

-0.47

Correlation Coefficient

Advantech  Asustek Computer

Very good diversification

The 3 months correlation between Advantech and Asustek is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Asustek Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asustek Computer and Advantech 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 Advantech Co are associated (or correlated) with Asustek Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asustek Computer has no effect on the direction of Advantech i.e., Advantech and Asustek Computer go up and down completely randomly.

Pair Corralation between Advantech and Asustek Computer

Assuming the 90 days trading horizon Advantech Co is expected to under-perform the Asustek Computer. But the stock apears to be less risky and, when comparing its historical volatility, Advantech Co is 1.45 times less risky than Asustek Computer. The stock trades about -0.1 of its potential returns per unit of risk. The Asustek Computer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  47,300  in Asustek Computer on February 20, 2024 and sell it today you would earn a total of  3,300  from holding Asustek Computer or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Advantech Co  vs.  Asustek Computer

Advantech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advantech Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Asustek Computer

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asustek Computer are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Asustek Computer may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Advantech and Asustek Computer

The main advantage of trading using opposite Advantech and Asustek Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantech position performs unexpectedly, Asustek Computer 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 Asustek Computer will offset losses from the drop in Asustek Computer's long position.

The idea behind Advantech Co and Asustek Computer pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.