Correlation Between Compeq Manufacturing and Gold Circuit

Can any of the company-specific risk be diversified away by investing in both Compeq Manufacturing and Gold Circuit 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 Compeq Manufacturing and Gold Circuit into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compeq Manufacturing Co and Gold Circuit Electronics, you can compare the effects of market volatilities on Compeq Manufacturing and Gold Circuit 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 Compeq Manufacturing with a short position of Gold Circuit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compeq Manufacturing and Gold Circuit.

Diversification Opportunities for Compeq Manufacturing and Gold Circuit

0.6

Correlation Coefficient

Compeq Manufacturing  Gold Circuit

Poor diversification

The 3 months correlation between Compeq and Gold is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Compeq Manufacturing Co and Gold Circuit Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Circuit Electronics and Compeq Manufacturing 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 Compeq Manufacturing Co are associated (or correlated) with Gold Circuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Circuit Electronics has no effect on the direction of Compeq Manufacturing i.e., Compeq Manufacturing and Gold Circuit go up and down completely randomly.

Pair Corralation between Compeq Manufacturing and Gold Circuit

Assuming the 90 days trading horizon Compeq Manufacturing Co is expected to under-perform the Gold Circuit. But the stock apears to be less risky and, when comparing its historical volatility, Compeq Manufacturing Co is 1.18 times less risky than Gold Circuit. The stock trades about -0.03 of its potential returns per unit of risk. The Gold Circuit Electronics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  19,900  in Gold Circuit Electronics on September 17, 2024 and sell it today you would earn a total of  3,300  from holding Gold Circuit Electronics or generate 16.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Compeq Manufacturing Co  vs.  Gold Circuit Electronics

Compeq Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compeq Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Compeq Manufacturing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gold Circuit Electronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Circuit Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gold Circuit showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compeq Manufacturing and Gold Circuit

The main advantage of trading using opposite Compeq Manufacturing and Gold Circuit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compeq Manufacturing position performs unexpectedly, Gold Circuit 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 Gold Circuit will offset losses from the drop in Gold Circuit's long position.

The idea behind Compeq Manufacturing Co and Gold Circuit Electronics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.