Correlation Between Compal Electronics and Danen Technology

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

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

Diversification Opportunities for Compal Electronics and Danen Technology

-0.34

Correlation Coefficient

Compal Electronics  Danen Technology

Very good diversification

The 3 months correlation between Compal and Danen is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Danen Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danen Technology Corp 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 Danen Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danen Technology Corp has no effect on the direction of Compal Electronics i.e., Compal Electronics and Danen Technology go up and down completely randomly.

Pair Corralation between Compal Electronics and Danen Technology

Assuming the 90 days trading horizon Compal Electronics is expected to generate 1.03 times more return on investment than Danen Technology. However, Compal Electronics is 1.03 times more volatile than Danen Technology Corp. It trades about 0.01 of its potential returns per unit of risk. Danen Technology Corp is currently generating about -0.14 per unit of risk. If you would invest  3,620  in Compal Electronics on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Compal Electronics or generate 0.0% return on investment over 90 days.

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

Compal Electronics  vs.  Danen Technology Corp

Compal Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Electronics are ranked lower than 5 (%) 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 February 2025.

Danen Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danen Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Compal Electronics and Danen Technology

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

The idea behind Compal Electronics and Danen Technology Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.