Correlation Between Compal Broadband and WPG Holdings

Can any of the company-specific risk be diversified away by investing in both Compal Broadband and WPG Holdings 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 WPG Holdings 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 WPG Holdings, you can compare the effects of market volatilities on Compal Broadband and WPG Holdings 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 WPG Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Broadband and WPG Holdings.

Diversification Opportunities for Compal Broadband and WPG Holdings

0.19

Correlation Coefficient

Compal Broadband  WPG Holdings

Average diversification

The 3 months correlation between Compal and WPG is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and WPG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPG Holdings 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 WPG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPG Holdings has no effect on the direction of Compal Broadband i.e., Compal Broadband and WPG Holdings go up and down completely randomly.

Pair Corralation between Compal Broadband and WPG Holdings

Assuming the 90 days trading horizon Compal Broadband Networks is expected to under-perform the WPG Holdings. In addition to that, Compal Broadband is 14.07 times more volatile than WPG Holdings. It trades about -0.2 of its total potential returns per unit of risk. WPG Holdings is currently generating about 0.23 per unit of volatility. If you would invest  5,150  in WPG Holdings on October 8, 2024 and sell it today you would earn a total of  20.00  from holding WPG Holdings or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Compal Broadband Networks  vs.  WPG Holdings

Compal Broadband Networks

Risk-Adjusted Performance

0 of 100

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.

WPG Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WPG Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WPG Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Compal Broadband and WPG Holdings

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

The idea behind Compal Broadband Networks and WPG Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.