Correlation Between Aerospace Industrial and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Aerospace Industrial 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 Aerospace Industrial and Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerospace Industrial Development and Compal Electronics, you can compare the effects of market volatilities on Aerospace Industrial 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 Aerospace Industrial with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerospace Industrial and Compal Electronics.
Diversification Opportunities for Aerospace Industrial and Compal Electronics
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Aerospace and Compal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Aerospace Industrial Developme and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and Aerospace Industrial 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 Aerospace Industrial Development 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 Aerospace Industrial i.e., Aerospace Industrial and Compal Electronics go up and down completely randomly.
Pair Corralation between Aerospace Industrial and Compal Electronics
Assuming the 90 days trading horizon Aerospace Industrial Development is expected to under-perform the Compal Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Aerospace Industrial Development is 1.06 times less risky than Compal Electronics. The stock trades about -0.08 of its potential returns per unit of risk. The Compal Electronics is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aerospace Industrial Developme vs. Compal Electronics
Performance |
| Timeline |
| Aerospace Industrial |
| Compal Electronics |
Aerospace Industrial and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerospace Industrial and Compal Electronics
The main advantage of trading using opposite Aerospace Industrial and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerospace Industrial 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.| Aerospace Industrial vs. CSBC Corp Taiwan | Aerospace Industrial vs. Eva Airways Corp | Aerospace Industrial vs. Taiwan High Speed | Aerospace Industrial vs. China Airlines |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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