Correlation Between Diodes Incorporated and ASE Industrial

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Can any of the company-specific risk be diversified away by investing in both Diodes Incorporated and ASE Industrial 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 Diodes Incorporated and ASE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diodes Incorporated and ASE Industrial Holding, you can compare the effects of market volatilities on Diodes Incorporated and ASE Industrial 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 Diodes Incorporated with a short position of ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diodes Incorporated and ASE Industrial.

Diversification Opportunities for Diodes Incorporated and ASE Industrial

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Diodes and ASE is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding and Diodes Incorporated 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 Diodes Incorporated are associated (or correlated) with ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Diodes Incorporated i.e., Diodes Incorporated and ASE Industrial go up and down completely randomly.

Pair Corralation between Diodes Incorporated and ASE Industrial

Given the investment horizon of 90 days Diodes Incorporated is expected to generate 2.94 times less return on investment than ASE Industrial. But when comparing it to its historical volatility, Diodes Incorporated is 1.11 times less risky than ASE Industrial. It trades about 0.09 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  953.00  in ASE Industrial Holding on December 30, 2023 and sell it today you would earn a total of  146.00  from holding ASE Industrial Holding or generate 15.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Diodes Incorporated  vs.  ASE Industrial Holding

 Performance 
       Timeline  
Diodes Incorporated 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Diodes Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
ASE Industrial Holding 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, ASE Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Diodes Incorporated and ASE Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Diodes Incorporated and ASE Industrial

The main advantage of trading using opposite Diodes Incorporated and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diodes Incorporated position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial's long position.
The idea behind Diodes Incorporated and ASE Industrial Holding 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 Stocks Directory module to find actively traded stocks across global markets.

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