Correlation Between Advanced Energy and Hiwin Mikrosystem

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

By analyzing existing cross correlation between Advanced Energy Solution and Hiwin Mikrosystem Corp, you can compare the effects of market volatilities on Advanced Energy and Hiwin Mikrosystem 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 Advanced Energy with a short position of Hiwin Mikrosystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Hiwin Mikrosystem.

Diversification Opportunities for Advanced Energy and Hiwin Mikrosystem

0.29

Correlation Coefficient

Advanced Energy  Hiwin Mikrosystem

Modest diversification

The 3 months correlation between Advanced and Hiwin is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Solution and Hiwin Mikrosystem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiwin Mikrosystem Corp and Advanced Energy 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 Advanced Energy Solution are associated (or correlated) with Hiwin Mikrosystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiwin Mikrosystem Corp has no effect on the direction of Advanced Energy i.e., Advanced Energy and Hiwin Mikrosystem go up and down completely randomly.

Pair Corralation between Advanced Energy and Hiwin Mikrosystem

Assuming the 90 days trading horizon Advanced Energy Solution is expected to generate 0.79 times more return on investment than Hiwin Mikrosystem. However, Advanced Energy Solution is 1.27 times less risky than Hiwin Mikrosystem. It trades about 0.28 of its potential returns per unit of risk. Hiwin Mikrosystem Corp is currently generating about 0.1 per unit of risk. If you would invest  49,900  in Advanced Energy Solution on September 1, 2024 and sell it today you would earn a total of  38,100  from holding Advanced Energy Solution or generate 76.35% return on investment over 90 days.

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

Advanced Energy Solution  vs.  Hiwin Mikrosystem Corp

Advanced Energy Solution

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Hiwin Mikrosystem Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hiwin Mikrosystem Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hiwin Mikrosystem showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Energy and Hiwin Mikrosystem

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

The idea behind Advanced Energy Solution and Hiwin Mikrosystem 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.