Correlation Between Compal Broadband and Golden Biotechnology

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

Diversification Opportunities for Compal Broadband and Golden Biotechnology

0.07

Correlation Coefficient

Compal Broadband  Golden Biotechnology

Significant diversification

The 3 months correlation between Compal and Golden is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Golden Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Biotechnology 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 Golden Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Biotechnology has no effect on the direction of Compal Broadband i.e., Compal Broadband and Golden Biotechnology go up and down completely randomly.

Pair Corralation between Compal Broadband and Golden Biotechnology

Assuming the 90 days trading horizon Compal Broadband Networks is expected to under-perform the Golden Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, Compal Broadband Networks is 3.48 times less risky than Golden Biotechnology. The stock trades about -0.16 of its potential returns per unit of risk. The Golden Biotechnology is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,560  in Golden Biotechnology on October 11, 2024 and sell it today you would earn a total of  305.00  from holding Golden Biotechnology or generate 19.55% return on investment over 90 days.

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

Compal Broadband Networks  vs.  Golden Biotechnology

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

Golden Biotechnology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Biotechnology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Golden Biotechnology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Compal Broadband and Golden Biotechnology

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

The idea behind Compal Broadband Networks and Golden Biotechnology 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.