Correlation Between Newretail and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Newretail 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 Newretail and Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Newretail Co and Compal Electronics, you can compare the effects of market volatilities on Newretail 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 Newretail with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Newretail and Compal Electronics.
Diversification Opportunities for Newretail and Compal Electronics
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Newretail and Compal is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and Newretail 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 Newretail 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 Newretail i.e., Newretail and Compal Electronics go up and down completely randomly.
Pair Corralation between Newretail and Compal Electronics
Assuming the 90 days trading horizon Newretail Co is expected to under-perform the Compal Electronics. In addition to that, Newretail is 1.55 times more volatile than Compal Electronics. It trades about -0.15 of its total potential returns per unit of risk. Compal Electronics is currently generating about 0.02 per unit of volatility. If you would invest 3,650 in Compal Electronics on October 29, 2024 and sell it today you would earn a total of 15.00 from holding Compal Electronics or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Newretail Co vs. Compal Electronics
Performance |
| Timeline |
| Newretail |
| Compal Electronics |
Newretail and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Newretail and Compal Electronics
The main advantage of trading using opposite Newretail and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newretail 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.| Newretail vs. Chicony Power Technology | Newretail vs. SciVision Biotech | Newretail vs. Yuan High Tech Development | Newretail vs. Asmedia Technology |
| Compal Electronics vs. Unimicron Technology Corp | Compal Electronics vs. Kinsus Interconnect Technology | Compal Electronics vs. Novatek Microelectronics Corp | Compal Electronics vs. Delta Electronics |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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