Correlation Between Compal Electronics and Asmedia Technology

Can any of the company-specific risk be diversified away by investing in both Compal Electronics and Asmedia 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 Asmedia 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 Asmedia Technology, you can compare the effects of market volatilities on Compal Electronics and Asmedia 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 Asmedia Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Asmedia Technology.

Diversification Opportunities for Compal Electronics and Asmedia Technology

0.19

Correlation Coefficient

Compal Electronics  Asmedia Technology

Average diversification

The 3 months correlation between Compal and Asmedia is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Asmedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asmedia Technology 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 Asmedia Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asmedia Technology has no effect on the direction of Compal Electronics i.e., Compal Electronics and Asmedia Technology go up and down completely randomly.

Pair Corralation between Compal Electronics and Asmedia Technology

Assuming the 90 days trading horizon Compal Electronics is expected to generate 16.94 times less return on investment than Asmedia Technology. But when comparing it to its historical volatility, Compal Electronics is 1.79 times less risky than Asmedia Technology. It trades about 0.01 of its potential returns per unit of risk. Asmedia Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  174,000  in Asmedia Technology on October 22, 2024 and sell it today you would earn a total of  30,500  from holding Asmedia Technology or generate 17.53% 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.  Asmedia Technology

Compal Electronics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Compal Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Asmedia Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asmedia Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asmedia Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compal Electronics and Asmedia Technology

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

The idea behind Compal Electronics and Asmedia Technology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..