Correlation Between Compal Electronics and Allied Circuit
Can any of the company-specific risk be diversified away by investing in both Compal Electronics and Allied Circuit 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 Allied Circuit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compal Electronics and Allied Circuit Co, you can compare the effects of market volatilities on Compal Electronics and Allied Circuit 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 Allied Circuit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Allied Circuit.
Diversification Opportunities for Compal Electronics and Allied Circuit
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Compal and Allied is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Allied Circuit Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Circuit 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 Allied Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Circuit has no effect on the direction of Compal Electronics i.e., Compal Electronics and Allied Circuit go up and down completely randomly.
Pair Corralation between Compal Electronics and Allied Circuit
Assuming the 90 days trading horizon Compal Electronics is expected to generate 0.75 times more return on investment than Allied Circuit. However, Compal Electronics is 1.34 times less risky than Allied Circuit. It trades about 0.05 of its potential returns per unit of risk. Allied Circuit Co is currently generating about 0.0 per unit of risk. If you would invest 3,075 in Compal Electronics on September 15, 2024 and sell it today you would earn a total of 665.00 from holding Compal Electronics or generate 21.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.62% |
| Values | Daily Returns |
Compal Electronics vs. Allied Circuit Co
Performance |
| Timeline |
| Compal Electronics |
| Allied Circuit |
Compal Electronics and Allied Circuit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Electronics and Allied Circuit
The main advantage of trading using opposite Compal Electronics and Allied Circuit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics position performs unexpectedly, Allied Circuit 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 Allied Circuit will offset losses from the drop in Allied Circuit's long position.| Compal Electronics vs. Quanta Computer | Compal Electronics vs. Inventec Corp | Compal Electronics vs. Asustek Computer | Compal Electronics vs. Acer Inc |
| Allied Circuit vs. Central Reinsurance Corp | Allied Circuit vs. Sports Gear Co | Allied Circuit vs. Sunspring Metal Corp | Allied Circuit vs. Chinese Maritime Transport |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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