Correlation Between Prime Electronics and Compal Broadband

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Can any of the company-specific risk be diversified away by investing in both Prime Electronics 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 Prime Electronics and Compal Broadband into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Electronics Satellitics and Compal Broadband Networks, you can compare the effects of market volatilities on Prime Electronics 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 Prime Electronics with a short position of Compal Broadband. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Electronics and Compal Broadband.

Diversification Opportunities for Prime Electronics and Compal Broadband

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Prime and Compal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prime Electronics Satellitics 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 Prime 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 Prime Electronics Satellitics 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 Prime Electronics i.e., Prime Electronics and Compal Broadband go up and down completely randomly.

Pair Corralation between Prime Electronics and Compal Broadband

Assuming the 90 days trading horizon Prime Electronics Satellitics is expected to generate 1.28 times more return on investment than Compal Broadband. However, Prime Electronics is 1.28 times more volatile than Compal Broadband Networks. It trades about 0.04 of its potential returns per unit of risk. Compal Broadband Networks is currently generating about -0.01 per unit of risk. If you would invest  1,100  in Prime Electronics Satellitics on October 9, 2024 and sell it today you would earn a total of  215.00  from holding Prime Electronics Satellitics or generate 19.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.59%
ValuesDaily Returns

Prime Electronics Satellitics  vs.  Compal Broadband Networks

 Performance 
       Timeline  
Prime Electronics 

Risk-Adjusted Performance

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Over the last 90 days Prime Electronics Satellitics 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
Compal Broadband Networks 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Compal Broadband Networks has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Prime Electronics and Compal Broadband Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Prime Electronics and Compal Broadband

The main advantage of trading using opposite Prime Electronics and Compal Broadband positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Electronics 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 Prime Electronics Satellitics 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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