Correlation Between Lite On and Acer

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

By analyzing existing cross correlation between Lite On Technology Corp and Acer Inc, you can compare the effects of market volatilities on Lite On and Acer 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 Lite On with a short position of Acer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lite On and Acer.

Diversification Opportunities for Lite On and Acer

-0.03

Correlation Coefficient

Lite On  Acer

Good diversification

The 3 months correlation between Lite and Acer is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lite On Technology Corp and Acer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acer Inc and Lite On 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 Lite On Technology Corp are associated (or correlated) with Acer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acer Inc has no effect on the direction of Lite On i.e., Lite On and Acer go up and down completely randomly.

Pair Corralation between Lite On and Acer

Assuming the 90 days trading horizon Lite On Technology Corp is expected to generate 1.02 times more return on investment than Acer. However, Lite On is 1.02 times more volatile than Acer Inc. It trades about -0.02 of its potential returns per unit of risk. Acer Inc is currently generating about -0.13 per unit of risk. If you would invest  10,700  in Lite On Technology Corp on August 31, 2024 and sell it today you would lose (300.00) from holding Lite On Technology Corp or give up 2.8% of portfolio value over 90 days.

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

Lite On Technology Corp  vs.  Acer Inc

Lite On Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lite On Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lite On is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Acer Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lite On and Acer

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

The idea behind Lite On Technology Corp and Acer Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.