Correlation Between STMicroelectronics and AU Optronics

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

By analyzing existing cross correlation between STMicroelectronics NV ADR and AU Optronics Corp, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and AU Optronics.

Diversification Opportunities for STMicroelectronics and AU Optronics

0.0

Correlation Coefficient

STMicroelectronics  AU Optronics

Pay attention - limited upside

The 3 months correlation between STMicroelectronics and AUO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV ADR and AU Optronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics Corp and STMicroelectronics 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 STMicroelectronics NV ADR 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 Corp has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and AU Optronics go up and down completely randomly.

Pair Corralation between STMicroelectronics and AU Optronics

If you would invest (100.00) in AU Optronics Corp on February 7, 2024 and sell it today you would earn a total of  100.00  from holding AU Optronics Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

STMicroelectronics NV ADR  vs.  AU Optronics Corp

STMicroelectronics NV ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMicroelectronics NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

AU Optronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AU Optronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AU Optronics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with STMicroelectronics and AU Optronics

The main advantage of trading using opposite STMicroelectronics and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.

The idea behind STMicroelectronics NV ADR and AU Optronics Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.