Correlation Between Compal Electronics and Kindom Construction
Can any of the company-specific risk be diversified away by investing in both Compal Electronics and Kindom Construction 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 Compal Electronics and Kindom Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compal Electronics and Kindom Construction Corp, you can compare the effects of market volatilities on Compal Electronics and Kindom Construction 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 Compal Electronics with a short position of Kindom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Kindom Construction.
Diversification Opportunities for Compal Electronics and Kindom Construction
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compal and Kindom is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Kindom Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kindom Construction Corp and Compal Electronics 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 Compal Electronics are associated (or correlated) with Kindom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kindom Construction Corp has no effect on the direction of Compal Electronics i.e., Compal Electronics and Kindom Construction go up and down completely randomly.
Pair Corralation between Compal Electronics and Kindom Construction
Assuming the 90 days trading horizon Compal Electronics is expected to generate 1.4 times more return on investment than Kindom Construction. However, Compal Electronics is 1.4 times more volatile than Kindom Construction Corp. It trades about -0.04 of its potential returns per unit of risk. Kindom Construction Corp is currently generating about -0.1 per unit of risk. If you would invest 3,705 in Compal Electronics on October 20, 2024 and sell it today you would lose (75.00) from holding Compal Electronics or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compal Electronics vs. Kindom Construction Corp
Performance |
| Timeline |
| Compal Electronics |
| Kindom Construction Corp |
Compal Electronics and Kindom Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Electronics and Kindom Construction
The main advantage of trading using opposite Compal Electronics and Kindom Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics position performs unexpectedly, Kindom Construction 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 Kindom Construction will offset losses from the drop in Kindom Construction's long position.| Compal Electronics vs. ASRock Inc | Compal Electronics vs. FIC Global | Compal Electronics vs. In Win Development | Compal Electronics vs. Getac Technology Corp |
| Kindom Construction vs. Highwealth Construction Corp | Kindom Construction vs. Cathay Real Estate | Kindom Construction vs. Huaku Development Co | Kindom Construction vs. Hung Sheng Construction |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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