Correlation Between Compal Electronics and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Compal Electronics and STMicroelectronics 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 Electronics and STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compal Electronics GDR and STMicroelectronics NV, you can compare the effects of market volatilities on Compal Electronics and STMicroelectronics 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 Electronics with a short position of STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and STMicroelectronics.
Diversification Opportunities for Compal Electronics and STMicroelectronics
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Compal and STMicroelectronics is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics GDR and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and Compal Electronics 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 Electronics GDR are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Compal Electronics i.e., Compal Electronics and STMicroelectronics go up and down completely randomly.
Pair Corralation between Compal Electronics and STMicroelectronics
Assuming the 90 days trading horizon Compal Electronics GDR is expected to generate 1.35 times more return on investment than STMicroelectronics. However, Compal Electronics is 1.35 times more volatile than STMicroelectronics NV. It trades about 0.02 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.1 per unit of risk. If you would invest 307.00 in Compal Electronics GDR on September 2, 2024 and sell it today you would earn a total of 3.00 from holding Compal Electronics GDR or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Compal Electronics GDR vs. STMicroelectronics NV
Performance |
| Timeline |
| Compal Electronics GDR |
| STMicroelectronics |
Compal Electronics and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compal Electronics and STMicroelectronics
The main advantage of trading using opposite Compal Electronics and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Compal Electronics vs. Samsung Electronics Co | Compal Electronics vs. Samsung Electronics Co | Compal Electronics vs. Hyundai Motor | Compal Electronics vs. Toyota Motor Corp |
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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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