Correlation Between Top Union and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Top Union 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 Top Union and Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Top Union Electronics and Compal Electronics, you can compare the effects of market volatilities on Top Union 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 Top Union with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Union and Compal Electronics.
Diversification Opportunities for Top Union and Compal Electronics
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Top and Compal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Top Union Electronics and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and Top Union 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 Top Union 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 Top Union i.e., Top Union and Compal Electronics go up and down completely randomly.
Pair Corralation between Top Union and Compal Electronics
Assuming the 90 days trading horizon Top Union Electronics is expected to under-perform the Compal Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Top Union Electronics is 1.24 times less risky than Compal Electronics. The stock trades about -0.01 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Top Union Electronics vs. Compal Electronics
Performance |
| Timeline |
| Top Union Electronics |
| Compal Electronics |
Top Union and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Top Union and Compal Electronics
The main advantage of trading using opposite Top Union and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Union 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.| Top Union vs. Para Light Electronics | Top Union vs. ANJI Technology Co | Top Union vs. Chia Chang Co | Top Union vs. Aiptek International |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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