Correlation Between Compal Electronics and Pili International

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

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

Diversification Opportunities for Compal Electronics and Pili International

-0.12

Correlation Coefficient

Compal Electronics  Pili International

Good diversification

The 3 months correlation between Compal and Pili is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Pili International Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pili International 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 Pili International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pili International has no effect on the direction of Compal Electronics i.e., Compal Electronics and Pili International go up and down completely randomly.

Pair Corralation between Compal Electronics and Pili International

Assuming the 90 days trading horizon Compal Electronics is expected to under-perform the Pili International. In addition to that, Compal Electronics is 1.43 times more volatile than Pili International Multimedia. It trades about -0.02 of its total potential returns per unit of risk. Pili International Multimedia is currently generating about 0.0 per unit of volatility. If you would invest  2,375  in Pili International Multimedia on December 4, 2024 and sell it today you would lose (10.00) from holding Pili International Multimedia or give up 0.42% 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.  Pili International Multimedia

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.

Pili International

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Compal Electronics and Pili International Multimedia 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.