Correlation Between Compal Electronics and Chia Yi

Can any of the company-specific risk be diversified away by investing in both Compal Electronics and Chia Yi 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 Chia Yi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compal Electronics and Chia Yi Steel, you can compare the effects of market volatilities on Compal Electronics and Chia Yi 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 Chia Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Chia Yi.

Diversification Opportunities for Compal Electronics and Chia Yi

0.25

Correlation Coefficient

Compal Electronics  Chia Yi

Modest diversification

The 3 months correlation between Compal and Chia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Chia Yi Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia Yi Steel 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 are associated (or correlated) with Chia Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia Yi Steel has no effect on the direction of Compal Electronics i.e., Compal Electronics and Chia Yi go up and down completely randomly.

Pair Corralation between Compal Electronics and Chia Yi

Assuming the 90 days trading horizon Compal Electronics is expected to generate 0.74 times more return on investment than Chia Yi. However, Compal Electronics is 1.36 times less risky than Chia Yi. It trades about 0.04 of its potential returns per unit of risk. Chia Yi Steel is currently generating about 0.0 per unit of risk. If you would invest  2,840  in Compal Electronics on October 24, 2024 and sell it today you would earn a total of  825.00  from holding Compal Electronics or generate 29.05% return on investment over 90 days.

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

Compal Electronics  vs.  Chia Yi Steel

Compal Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Compal Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Chia Yi Steel

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Yi Steel are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Yi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Compal Electronics and Chia Yi

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

The idea behind Compal Electronics and Chia Yi Steel 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.