Correlation Between Compal Electronics and Intech Biopharm

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

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

Diversification Opportunities for Compal Electronics and Intech Biopharm

-0.8

Correlation Coefficient

Compal Electronics  Intech Biopharm

Pay attention - limited upside

The 3 months correlation between Compal and Intech is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Intech Biopharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intech Biopharm 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 Intech Biopharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intech Biopharm has no effect on the direction of Compal Electronics i.e., Compal Electronics and Intech Biopharm go up and down completely randomly.

Pair Corralation between Compal Electronics and Intech Biopharm

Assuming the 90 days trading horizon Compal Electronics is expected to generate 1.15 times more return on investment than Intech Biopharm. However, Compal Electronics is 1.15 times more volatile than Intech Biopharm. It trades about 0.18 of its potential returns per unit of risk. Intech Biopharm is currently generating about -0.07 per unit of risk. If you would invest  3,360  in Compal Electronics on September 12, 2024 and sell it today you would earn a total of  520.00  from holding Compal Electronics or generate 15.48% return on investment over 90 days.

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

Compal Electronics  vs.  Intech Biopharm

Compal Electronics

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Electronics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Compal Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Intech Biopharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intech Biopharm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Intech Biopharm 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 Intech Biopharm

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

The idea behind Compal Electronics and Intech Biopharm 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.