Correlation Between Compal Electronics and Chung Lien
Can any of the company-specific risk be diversified away by investing in both Compal Electronics and Chung Lien 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 Lien 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 Lien Transportation, you can compare the effects of market volatilities on Compal Electronics and Chung Lien 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 Lien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Chung Lien.
Diversification Opportunities for Compal Electronics and Chung Lien
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Compal and Chung is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Chung Lien Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Lien Transportation 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 Lien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Lien Transportation has no effect on the direction of Compal Electronics i.e., Compal Electronics and Chung Lien go up and down completely randomly.
Pair Corralation between Compal Electronics and Chung Lien
Assuming the 90 days trading horizon Compal Electronics is expected to generate 2.36 times more return on investment than Chung Lien. However, Compal Electronics is 2.36 times more volatile than Chung Lien Transportation. It trades about 0.06 of its potential returns per unit of risk. Chung Lien Transportation is currently generating about -0.04 per unit of risk. If you would invest 2,465 in Compal Electronics on November 29, 2024 and sell it today you would earn a total of 1,500 from holding Compal Electronics or generate 60.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.38% |
| Values | Daily Returns |
Compal Electronics vs. Chung Lien Transportation
Performance |
| Timeline |
| Compal Electronics |
| Chung Lien Transportation |
Compal Electronics and Chung Lien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Electronics and Chung Lien
The main advantage of trading using opposite Compal Electronics and Chung Lien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics position performs unexpectedly, Chung Lien 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 Lien will offset losses from the drop in Chung Lien's long position.| Compal Electronics vs. Quanta Computer | Compal Electronics vs. Inventec Corp | Compal Electronics vs. Asustek Computer | Compal Electronics vs. Acer Inc |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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