Correlation Between Grand Fortune and Compal Electronics

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

By analyzing existing cross correlation between Grand Fortune Securities and Compal Electronics, you can compare the effects of market volatilities on Grand Fortune and Compal Electronics 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 Grand Fortune with a short position of Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Fortune and Compal Electronics.

Diversification Opportunities for Grand Fortune and Compal Electronics

0.7

Correlation Coefficient

Grand Fortune  Compal Electronics

Poor diversification

The 3 months correlation between Grand and Compal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Grand Fortune Securities and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and Grand Fortune 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 Grand Fortune Securities are associated (or correlated) with Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics has no effect on the direction of Grand Fortune i.e., Grand Fortune and Compal Electronics go up and down completely randomly.

Pair Corralation between Grand Fortune and Compal Electronics

Assuming the 90 days trading horizon Grand Fortune Securities is expected to generate 0.61 times more return on investment than Compal Electronics. However, Grand Fortune Securities is 1.63 times less risky than Compal Electronics. It trades about 0.15 of its potential returns per unit of risk. Compal Electronics is currently generating about 0.01 per unit of risk. If you would invest  1,230  in Grand Fortune Securities on December 21, 2024 and sell it today you would earn a total of  105.00  from holding Grand Fortune Securities or generate 8.54% return on investment over 90 days.

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

Grand Fortune Securities  vs.  Compal Electronics

Grand Fortune Securities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Fortune Securities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Grand Fortune may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Grand Fortune and Compal Electronics

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

The idea behind Grand Fortune Securities and Compal Electronics 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.