Correlation Between Asustek Computer and IBASE Technology

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

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

Diversification Opportunities for Asustek Computer and IBASE Technology

-0.33

Correlation Coefficient

Asustek Computer  IBASE Technology

Very good diversification

The 3 months correlation between Asustek and IBASE is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Asustek Computer and IBASE Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBASE Technology and Asustek Computer 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 Asustek Computer are associated (or correlated) with IBASE Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBASE Technology has no effect on the direction of Asustek Computer i.e., Asustek Computer and IBASE Technology go up and down completely randomly.

Pair Corralation between Asustek Computer and IBASE Technology

Assuming the 90 days trading horizon Asustek Computer is expected to generate 1.48 times more return on investment than IBASE Technology. However, Asustek Computer is 1.48 times more volatile than IBASE Technology. It trades about 0.13 of its potential returns per unit of risk. IBASE Technology is currently generating about -0.02 per unit of risk. If you would invest  55,300  in Asustek Computer on September 30, 2024 and sell it today you would earn a total of  7,100  from holding Asustek Computer or generate 12.84% return on investment over 90 days.

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

Asustek Computer  vs.  IBASE Technology

Asustek Computer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asustek Computer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asustek Computer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IBASE Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Asustek Computer and IBASE Technology

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

The idea behind Asustek Computer and IBASE Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.