Correlation Between Her Chee and Asustek Computer

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

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

Diversification Opportunities for Her Chee and Asustek Computer

0.76

Correlation Coefficient

Her Chee  Asustek Computer

Poor diversification

The 3 months correlation between Her and Asustek is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Her Chee Industrial and Asustek Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asustek Computer and Her Chee 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 Her Chee Industrial are associated (or correlated) with Asustek Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asustek Computer has no effect on the direction of Her Chee i.e., Her Chee and Asustek Computer go up and down completely randomly.

Pair Corralation between Her Chee and Asustek Computer

Assuming the 90 days trading horizon Her Chee Industrial is expected to under-perform the Asustek Computer. In addition to that, Her Chee is 2.66 times more volatile than Asustek Computer. It trades about -0.01 of its total potential returns per unit of risk. Asustek Computer is currently generating about -0.01 per unit of volatility. If you would invest  61,100  in Asustek Computer on September 14, 2024 and sell it today you would lose (300.00) from holding Asustek Computer or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Her Chee Industrial  vs.  Asustek Computer

Her Chee Industrial

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Her Chee Industrial are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Her Chee showed solid returns over the last few months and may actually be approaching a breakup point.

Asustek Computer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asustek Computer are ranked lower than 9 (%) 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.

Pair Trading with Her Chee and Asustek Computer

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

The idea behind Her Chee Industrial and Asustek Computer 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 Stocks Directory module to find actively traded stocks across global markets.