Correlation Between Compal Electronics and Chung Hwa
Can any of the company-specific risk be diversified away by investing in both Compal Electronics and Chung Hwa 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 Chung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compal Electronics and Chung Hwa Food, you can compare the effects of market volatilities on Compal Electronics and Chung Hwa 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 Chung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Chung Hwa.
Diversification Opportunities for Compal Electronics and Chung Hwa
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Compal and Chung is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Chung Hwa Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Food 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 Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Food has no effect on the direction of Compal Electronics i.e., Compal Electronics and Chung Hwa go up and down completely randomly.
Pair Corralation between Compal Electronics and Chung Hwa
Assuming the 90 days trading horizon Compal Electronics is expected to generate 3.28 times more return on investment than Chung Hwa. However, Compal Electronics is 3.28 times more volatile than Chung Hwa Food. It trades about 0.12 of its potential returns per unit of risk. Chung Hwa Food is currently generating about -0.14 per unit of risk. If you would invest 3,450 in Compal Electronics on September 3, 2024 and sell it today you would earn a total of 235.00 from holding Compal Electronics or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compal Electronics vs. Chung Hwa Food
Performance |
| Timeline |
| Compal Electronics |
| Chung Hwa Food |
Compal Electronics and Chung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Electronics and Chung Hwa
The main advantage of trading using opposite Compal Electronics and Chung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics position performs unexpectedly, Chung Hwa 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 Chung Hwa will offset losses from the drop in Chung Hwa's long position.| Compal Electronics vs. Taiwan Semiconductor Manufacturing | Compal Electronics vs. Yang Ming Marine | Compal Electronics vs. ASE Industrial Holding | Compal Electronics vs. AU Optronics |
| Chung Hwa vs. Uni President Enterprises Corp | Chung Hwa vs. Lien Hwa Industrial | Chung Hwa vs. Great Wall Enterprise | Chung Hwa vs. Standard Foods 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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