Correlation Between Compal Electronics and GAME HOURS

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

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

Diversification Opportunities for Compal Electronics and GAME HOURS

-0.16

Correlation Coefficient

Compal Electronics  GAME HOURS

Good diversification

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

Pair Corralation between Compal Electronics and GAME HOURS

Assuming the 90 days trading horizon Compal Electronics is expected to generate 0.43 times more return on investment than GAME HOURS. However, Compal Electronics is 2.34 times less risky than GAME HOURS. It trades about -0.02 of its potential returns per unit of risk. GAME HOURS is currently generating about -0.26 per unit of risk. If you would invest  3,840  in Compal Electronics on December 4, 2024 and sell it today you would lose (105.00) from holding Compal Electronics or give up 2.73% of portfolio value over 90 days.

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

Compal Electronics  vs.  GAME HOURS

Compal Electronics

Risk-Adjusted Performance

Very 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.

GAME HOURS

Risk-Adjusted Performance

Very Weak

Over the last 90 days GAME HOURS 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 April 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 GAME HOURS

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

The idea behind Compal Electronics and GAME HOURS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.