Correlation Between Compal Broadband and Hsin Ba

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

Diversification Opportunities for Compal Broadband and Hsin Ba

0.15

Correlation Coefficient

Compal Broadband  Hsin Ba

Average diversification

The 3 months correlation between Compal and Hsin is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Hsin Ba Ba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Ba Ba 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 Hsin Ba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Ba Ba has no effect on the direction of Compal Broadband i.e., Compal Broadband and Hsin Ba go up and down completely randomly.

Pair Corralation between Compal Broadband and Hsin Ba

Assuming the 90 days trading horizon Compal Broadband Networks is expected to generate 0.65 times more return on investment than Hsin Ba. However, Compal Broadband Networks is 1.53 times less risky than Hsin Ba. It trades about -0.09 of its potential returns per unit of risk. Hsin Ba Ba is currently generating about -0.08 per unit of risk. If you would invest  2,425  in Compal Broadband Networks on December 30, 2024 and sell it today you would lose (180.00) from holding Compal Broadband Networks or give up 7.42% of portfolio value over 90 days.

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

Compal Broadband Networks  vs.  Hsin Ba Ba

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Hsin Ba Ba

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hsin Ba Ba has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Compal Broadband and Hsin Ba

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

The idea behind Compal Broadband Networks and Hsin Ba Ba 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.