Correlation Between ABC Taiwan and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan 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 ABC Taiwan and Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABC Taiwan Electronics and Compal Electronics, you can compare the effects of market volatilities on ABC Taiwan 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 ABC Taiwan with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and Compal Electronics.
Diversification Opportunities for ABC Taiwan and Compal Electronics
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ABC and Compal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and ABC Taiwan 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 ABC Taiwan Electronics 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 ABC Taiwan i.e., ABC Taiwan and Compal Electronics go up and down completely randomly.
Pair Corralation between ABC Taiwan and Compal Electronics
Assuming the 90 days trading horizon ABC Taiwan Electronics is expected to under-perform the Compal Electronics. In addition to that, ABC Taiwan is 1.02 times more volatile than Compal Electronics. It trades about -0.04 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 3,585 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. Compal Electronics
Performance |
| Timeline |
| ABC Taiwan Electronics |
| Compal Electronics |
ABC Taiwan and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and Compal Electronics
The main advantage of trading using opposite ABC Taiwan and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan 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.| ABC Taiwan vs. Wei Chuan Foods | ABC Taiwan vs. Galaxy Software Services | ABC Taiwan vs. Compal Broadband Networks | ABC Taiwan vs. Chung Lien Transportation |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |