Correlation Between WinMate Communication and Compal Broadband

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

By analyzing existing cross correlation between WinMate Communication INC and Compal Broadband Networks, you can compare the effects of market volatilities on WinMate Communication and Compal Broadband 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 WinMate Communication with a short position of Compal Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of WinMate Communication and Compal Broadband.

Diversification Opportunities for WinMate Communication and Compal Broadband

0.54

Correlation Coefficient

WinMate Communication  Compal Broadband

Very weak diversification

The 3 months correlation between WinMate and Compal is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding WinMate Communication INC and Compal Broadband Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Broadband Networks and WinMate Communication 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 WinMate Communication INC are associated (or correlated) with Compal Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Broadband Networks has no effect on the direction of WinMate Communication i.e., WinMate Communication and Compal Broadband go up and down completely randomly.

Pair Corralation between WinMate Communication and Compal Broadband

Assuming the 90 days trading horizon WinMate Communication is expected to generate 1.25 times less return on investment than Compal Broadband. But when comparing it to its historical volatility, WinMate Communication INC is 1.9 times less risky than Compal Broadband. It trades about 0.02 of its potential returns per unit of risk. Compal Broadband Networks is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,450  in Compal Broadband Networks on September 12, 2024 and sell it today you would earn a total of  5.00  from holding Compal Broadband Networks or generate 0.2% return on investment over 90 days.

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

WinMate Communication INC  vs.  Compal Broadband Networks

WinMate Communication INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WinMate Communication INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, WinMate Communication is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Compal Broadband Networks

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Broadband Networks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Compal Broadband 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 WinMate Communication and Compal Broadband

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

The idea behind WinMate Communication INC and Compal Broadband Networks 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.