Correlation Between STMicroelectronics and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Compal Electronics 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 STMicroelectronics and Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Compal Electronics GDR, you can compare the effects of market volatilities on STMicroelectronics and Compal Electronics 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 STMicroelectronics with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Compal Electronics.
Diversification Opportunities for STMicroelectronics and Compal Electronics
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between STMicroelectronics and Compal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Compal Electronics GDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics GDR and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics GDR has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Compal Electronics go up and down completely randomly.
Pair Corralation between STMicroelectronics and Compal Electronics
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Compal Electronics. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.35 times less risky than Compal Electronics. The stock trades about -0.1 of its potential returns per unit of risk. The Compal Electronics GDR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 307.00 in Compal Electronics GDR on September 2, 2024 and sell it today you would earn a total of 3.00 from holding Compal Electronics GDR or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
STMicroelectronics NV vs. Compal Electronics GDR
Performance |
| Timeline |
| STMicroelectronics |
| Compal Electronics GDR |
STMicroelectronics and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Compal Electronics
The main advantage of trading using opposite STMicroelectronics and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Compal Electronics 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 Compal Electronics will offset losses from the drop in Compal Electronics' long position.| STMicroelectronics vs. Thyssenkrupp AG ON | STMicroelectronics vs. Cloudcoco Group PLC | STMicroelectronics vs. Trainline Plc | STMicroelectronics vs. Diversified Energy |
| Compal Electronics vs. Samsung Electronics Co | Compal Electronics vs. Samsung Electronics Co | Compal Electronics vs. Hyundai Motor | Compal Electronics vs. Toyota Motor Corp |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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