Correlation Between AU Optronics and Jentech Precision

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

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

Diversification Opportunities for AU Optronics and Jentech Precision

-0.01

Correlation Coefficient

AU Optronics  Jentech Precision

Good diversification

The 3 months correlation between 2409 and Jentech is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding AU Optronics and Jentech Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jentech Precision and AU Optronics 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 AU Optronics are associated (or correlated) with Jentech Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jentech Precision has no effect on the direction of AU Optronics i.e., AU Optronics and Jentech Precision go up and down completely randomly.

Pair Corralation between AU Optronics and Jentech Precision

Assuming the 90 days trading horizon AU Optronics is expected to under-perform the Jentech Precision. But the stock apears to be less risky and, when comparing its historical volatility, AU Optronics is 1.84 times less risky than Jentech Precision. The stock trades about -0.03 of its potential returns per unit of risk. The Jentech Precision Industrial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  132,000  in Jentech Precision Industrial on September 13, 2024 and sell it today you would earn a total of  19,000  from holding Jentech Precision Industrial or generate 14.39% return on investment over 90 days.

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

AU Optronics  vs.  Jentech Precision Industrial

AU Optronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Jentech Precision

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jentech Precision Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Jentech Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AU Optronics and Jentech Precision

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

The idea behind AU Optronics and Jentech Precision Industrial 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.