Correlation Between Compal Broadband and U Media
Can any of the company-specific risk be diversified away by investing in both Compal Broadband and U Media 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 Compal Broadband and U Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compal Broadband Networks and U Media Communications, you can compare the effects of market volatilities on Compal Broadband and U Media 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 Compal Broadband with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Broadband and U Media.
Diversification Opportunities for Compal Broadband and U Media
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Compal and 6470 is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and Compal Broadband 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 Compal Broadband Networks are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Compal Broadband i.e., Compal Broadband and U Media go up and down completely randomly.
Pair Corralation between Compal Broadband and U Media
Assuming the 90 days trading horizon Compal Broadband Networks is expected to generate 1.21 times more return on investment than U Media. However, Compal Broadband is 1.21 times more volatile than U Media Communications. It trades about 0.02 of its potential returns per unit of risk. U Media Communications is currently generating about -0.06 per unit of risk. If you would invest 2,830 in Compal Broadband Networks on August 26, 2024 and sell it today you would earn a total of 190.00 from holding Compal Broadband Networks or generate 6.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compal Broadband Networks vs. U Media Communications
Performance |
| Timeline |
| Compal Broadband Networks |
| U Media Communications |
Compal Broadband and U Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Broadband and U Media
The main advantage of trading using opposite Compal Broadband and U Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Broadband position performs unexpectedly, U Media 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 U Media will offset losses from the drop in U Media's long position.| Compal Broadband vs. Accton Technology Corp | Compal Broadband vs. Arcadyan Technology Corp | Compal Broadband vs. Advanced Ceramic X | Compal Broadband vs. Gemtek Technology Co |
| U Media vs. Accton Technology Corp | U Media vs. Arcadyan Technology Corp | U Media vs. Advanced Ceramic X | U Media vs. Gemtek Technology Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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