Correlation Between PlayNitride and Compal Broadband

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

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

Diversification Opportunities for PlayNitride and Compal Broadband

-0.41

Correlation Coefficient

PlayNitride  Compal Broadband

Very good diversification

The 3 months correlation between PlayNitride and Compal is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding PlayNitride and Compal Broadband Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Broadband Networks and PlayNitride 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 PlayNitride are associated (or correlated) with Compal Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Broadband Networks has no effect on the direction of PlayNitride i.e., PlayNitride and Compal Broadband go up and down completely randomly.

Pair Corralation between PlayNitride and Compal Broadband

Assuming the 90 days trading horizon PlayNitride is expected to generate 1.7 times more return on investment than Compal Broadband. However, PlayNitride is 1.7 times more volatile than Compal Broadband Networks. It trades about 0.24 of its potential returns per unit of risk. Compal Broadband Networks is currently generating about -0.04 per unit of risk. If you would invest  10,100  in PlayNitride on October 7, 2024 and sell it today you would earn a total of  9,950  from holding PlayNitride or generate 98.51% return on investment over 90 days.

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

PlayNitride  vs.  Compal Broadband Networks

PlayNitride

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PlayNitride are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PlayNitride showed solid returns over the last few months and may actually be approaching a breakup point.

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 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 PlayNitride and Compal Broadband

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

The idea behind PlayNitride and Compal Broadband Networks 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.