Correlation Between Compal Electronics and Novatek Microelectronics
Can any of the company-specific risk be diversified away by investing in both Compal Electronics and Novatek Microelectronics 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 Novatek Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compal Electronics and Novatek Microelectronics Corp, you can compare the effects of market volatilities on Compal Electronics and Novatek Microelectronics 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 Novatek Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Novatek Microelectronics.
Diversification Opportunities for Compal Electronics and Novatek Microelectronics
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Compal and Novatek is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Novatek Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novatek Microelectronics 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 Novatek Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novatek Microelectronics has no effect on the direction of Compal Electronics i.e., Compal Electronics and Novatek Microelectronics go up and down completely randomly.
Pair Corralation between Compal Electronics and Novatek Microelectronics
Assuming the 90 days trading horizon Compal Electronics is expected to generate 1.22 times more return on investment than Novatek Microelectronics. However, Compal Electronics is 1.22 times more volatile than Novatek Microelectronics Corp. It trades about 0.08 of its potential returns per unit of risk. Novatek Microelectronics Corp is currently generating about -0.13 per unit of risk. If you would invest 3,600 in Compal Electronics on August 30, 2024 and sell it today you would earn a total of 100.00 from holding Compal Electronics or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compal Electronics vs. Novatek Microelectronics Corp
Performance |
| Timeline |
| Compal Electronics |
| Novatek Microelectronics |
Compal Electronics and Novatek Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Electronics and Novatek Microelectronics
The main advantage of trading using opposite Compal Electronics and Novatek Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics position performs unexpectedly, Novatek Microelectronics 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 Novatek Microelectronics will offset losses from the drop in Novatek Microelectronics' long position.| Compal Electronics vs. Quanta Computer | Compal Electronics vs. Inventec Corp | Compal Electronics vs. Asustek Computer | Compal Electronics vs. Acer Inc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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