Correlation Between ASE Industrial and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both ASE 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 ASE 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 ASE Industrial Holding and Compal Electronics, you can compare the effects of market volatilities on ASE 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 ASE Industrial with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and Compal Electronics.
Diversification Opportunities for ASE Industrial and Compal Electronics
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ASE and Compal is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and ASE 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 ASE Industrial Holding 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 ASE Industrial i.e., ASE Industrial and Compal Electronics go up and down completely randomly.
Pair Corralation between ASE Industrial and Compal Electronics
Assuming the 90 days trading horizon ASE Industrial Holding is expected to generate 0.99 times more return on investment than Compal Electronics. However, ASE Industrial Holding is 1.01 times less risky than Compal Electronics. It trades about -0.12 of its potential returns per unit of risk. Compal Electronics is currently generating about -0.35 per unit of risk. If you would invest 15,500 in ASE Industrial Holding on January 13, 2025 and sell it today you would lose (2,050) from holding ASE Industrial Holding or give up 13.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. Compal Electronics
Performance |
| Timeline |
| ASE Industrial Holding |
| Compal Electronics |
ASE Industrial and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and Compal Electronics
The main advantage of trading using opposite ASE Industrial and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE 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.| ASE Industrial vs. United Renewable Energy | ASE Industrial vs. Motech Industries Co | ASE Industrial vs. Tainergy Tech Co | ASE Industrial vs. Gigasolar Materials |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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