Correlation Between Advantech and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Advantech and Compal Electronics 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 Advantech and Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantech Co and Compal Electronics, you can compare the effects of market volatilities on Advantech and Compal Electronics 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 Advantech with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Compal Electronics.
Diversification Opportunities for Advantech and Compal Electronics
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Advantech and Compal is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and Advantech 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 Advantech Co are associated (or correlated) with Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics has no effect on the direction of Advantech i.e., Advantech and Compal Electronics go up and down completely randomly.
Pair Corralation between Advantech and Compal Electronics
Assuming the 90 days trading horizon Advantech is expected to generate 5.09 times less return on investment than Compal Electronics. But when comparing it to its historical volatility, Advantech Co is 1.19 times less risky than Compal Electronics. It trades about 0.02 of its potential returns per unit of risk. Compal Electronics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,195 in Compal Electronics on August 30, 2024 and sell it today you would earn a total of 1,565 from holding Compal Electronics or generate 71.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Advantech Co vs. Compal Electronics
Performance |
| Timeline |
| Advantech |
| Compal Electronics |
Advantech and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantech and Compal Electronics
The main advantage of trading using opposite Advantech and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantech position performs unexpectedly, Compal Electronics 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 Compal Electronics will offset losses from the drop in Compal Electronics' long position.| Advantech vs. Delta Electronics | Advantech vs. Quanta Computer | Advantech vs. Realtek Semiconductor Corp | Advantech vs. President Chain Store |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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