Correlation Between ASE Industrial and EMCORE

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

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

Diversification Opportunities for ASE Industrial and EMCORE

-0.69

Correlation Coefficient

ASE Industrial  EMCORE

Excellent diversification

The 3 months correlation between ASE and EMCORE is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE and ASE Industrial 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 ASE Industrial Holding are associated (or correlated) with EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of ASE Industrial i.e., ASE Industrial and EMCORE go up and down completely randomly.

Pair Corralation between ASE Industrial and EMCORE

Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.39 times more return on investment than EMCORE. However, ASE Industrial Holding is 2.59 times less risky than EMCORE. It trades about -0.21 of its potential returns per unit of risk. EMCORE is currently generating about -0.16 per unit of risk. If you would invest  1,098  in ASE Industrial Holding on January 26, 2024 and sell it today you would lose (83.00) from holding ASE Industrial Holding or give up 7.56% of portfolio value over 90 days.

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

ASE Industrial Holding  vs.  EMCORE

ASE Industrial Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

EMCORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMCORE has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with ASE Industrial and EMCORE

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

The idea behind ASE Industrial Holding and EMCORE 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 Transaction History module to view history of all your transactions and understand their impact on performance.