Correlation Between Compal Broadband and Handa Pharmaceuticals

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

Diversification Opportunities for Compal Broadband and Handa Pharmaceuticals

-0.47

Correlation Coefficient

Compal Broadband  Handa Pharmaceuticals

Very good diversification

The 3 months correlation between Compal and Handa is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Handa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Handa Pharmaceuticals 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 Handa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Handa Pharmaceuticals has no effect on the direction of Compal Broadband i.e., Compal Broadband and Handa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Compal Broadband and Handa Pharmaceuticals

Assuming the 90 days trading horizon Compal Broadband Networks is expected to generate 2.02 times more return on investment than Handa Pharmaceuticals. However, Compal Broadband is 2.02 times more volatile than Handa Pharmaceuticals. It trades about -0.1 of its potential returns per unit of risk. Handa Pharmaceuticals is currently generating about -0.32 per unit of risk. If you would invest  2,735  in Compal Broadband Networks on September 16, 2024 and sell it today you would lose (290.00) from holding Compal Broadband Networks or give up 10.6% of portfolio value over 90 days.

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

Compal Broadband Networks  vs.  Handa Pharmaceuticals

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.

Handa Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Handa Pharmaceuticals 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Compal Broadband and Handa Pharmaceuticals

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

The idea behind Compal Broadband Networks and Handa Pharmaceuticals 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..