Correlation Between Compal Electronics and Everlight Electronics

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

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

Diversification Opportunities for Compal Electronics and Everlight Electronics

0.16

Correlation Coefficient

Compal Electronics  Everlight Electronics

Average diversification

The 3 months correlation between Compal and Everlight is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Everlight Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everlight Electronics 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 Everlight Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everlight Electronics has no effect on the direction of Compal Electronics i.e., Compal Electronics and Everlight Electronics go up and down completely randomly.

Pair Corralation between Compal Electronics and Everlight Electronics

Assuming the 90 days trading horizon Compal Electronics is expected to under-perform the Everlight Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Compal Electronics is 1.36 times less risky than Everlight Electronics. The stock trades about -0.06 of its potential returns per unit of risk. The Everlight Electronics Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,760  in Everlight Electronics Co on September 15, 2024 and sell it today you would earn a total of  390.00  from holding Everlight Electronics Co or generate 5.03% return on investment over 90 days.

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

Compal Electronics  vs.  Everlight Electronics Co

Compal Electronics

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Compal Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Everlight Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Everlight Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Everlight Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Compal Electronics and Everlight Electronics

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

The idea behind Compal Electronics and Everlight Electronics Co 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.