Correlation Between Compal Electronics and ABC Taiwan
Can any of the company-specific risk be diversified away by investing in both Compal Electronics and ABC Taiwan 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 ABC Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compal Electronics and ABC Taiwan Electronics, you can compare the effects of market volatilities on Compal Electronics and ABC Taiwan 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 ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and ABC Taiwan.
Diversification Opportunities for Compal Electronics and ABC Taiwan
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Compal and ABC is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics 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 ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Compal Electronics i.e., Compal Electronics and ABC Taiwan go up and down completely randomly.
Pair Corralation between Compal Electronics and ABC Taiwan
Assuming the 90 days trading horizon Compal Electronics is expected to generate 0.98 times more return on investment than ABC Taiwan. However, Compal Electronics is 1.02 times less risky than ABC Taiwan. It trades about 0.02 of its potential returns per unit of risk. ABC Taiwan Electronics is currently generating about -0.04 per unit of risk. If you would invest 3,585 in Compal Electronics on October 13, 2024 and sell it today you would earn a total of 65.00 from holding Compal Electronics or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compal Electronics vs. ABC Taiwan Electronics
Performance |
| Timeline |
| Compal Electronics |
| ABC Taiwan Electronics |
Compal Electronics and ABC Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Electronics and ABC Taiwan
The main advantage of trading using opposite Compal Electronics and ABC Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics position performs unexpectedly, ABC Taiwan 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 ABC Taiwan will offset losses from the drop in ABC Taiwan's long position.| Compal Electronics vs. Quanta Computer | Compal Electronics vs. Inventec Corp | Compal Electronics vs. Asustek Computer | Compal Electronics vs. Acer Inc |
| ABC Taiwan vs. Wei Chuan Foods | ABC Taiwan vs. Galaxy Software Services | ABC Taiwan vs. Compal Broadband Networks | ABC Taiwan vs. Chung Lien Transportation |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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