Correlation Between Compal Broadband and Sentronic International

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

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

Diversification Opportunities for Compal Broadband and Sentronic International

0.24

Correlation Coefficient

Compal Broadband  Sentronic International

Modest diversification

The 3 months correlation between Compal and Sentronic is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Sentronic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentronic International and Compal Broadband 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 Broadband Networks are associated (or correlated) with Sentronic International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentronic International has no effect on the direction of Compal Broadband i.e., Compal Broadband and Sentronic International go up and down completely randomly.

Pair Corralation between Compal Broadband and Sentronic International

Assuming the 90 days trading horizon Compal Broadband Networks is expected to under-perform the Sentronic International. But the stock apears to be less risky and, when comparing its historical volatility, Compal Broadband Networks is 1.27 times less risky than Sentronic International. The stock trades about -0.03 of its potential returns per unit of risk. The Sentronic International is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,360  in Sentronic International on December 23, 2024 and sell it today you would earn a total of  520.00  from holding Sentronic International or generate 22.03% return on investment over 90 days.

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

Compal Broadband Networks  vs.  Sentronic International

Compal Broadband Networks

Risk-Adjusted Performance

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sentronic International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sentronic International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sentronic International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compal Broadband and Sentronic International

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

The idea behind Compal Broadband Networks and Sentronic International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.