Correlation Between Compal Electronics and Pets At

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

By analyzing existing cross correlation between Compal Electronics GDR and Pets at Home, you can compare the effects of market volatilities on Compal Electronics and Pets At 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 Electronics with a short position of Pets At. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Pets At.

Diversification Opportunities for Compal Electronics and Pets At

0.22

Correlation Coefficient

Compal Electronics  Pets At

Modest diversification

The 3 months correlation between Compal and Pets is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics GDR and Pets at Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pets at Home and Compal Electronics 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 Electronics GDR are associated (or correlated) with Pets At. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pets at Home has no effect on the direction of Compal Electronics i.e., Compal Electronics and Pets At go up and down completely randomly.

Pair Corralation between Compal Electronics and Pets At

Assuming the 90 days trading horizon Compal Electronics is expected to generate 3.06 times less return on investment than Pets At. But when comparing it to its historical volatility, Compal Electronics GDR is 2.92 times less risky than Pets At. It trades about 0.12 of its potential returns per unit of risk. Pets at Home is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  20,460  in Pets at Home on December 30, 2024 and sell it today you would earn a total of  3,180  from holding Pets at Home or generate 15.54% return on investment over 90 days.

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

Compal Electronics GDR  vs.  Pets at Home

Compal Electronics GDR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Electronics GDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Compal Electronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pets at Home

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pets at Home are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pets At unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compal Electronics and Pets At

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

The idea behind Compal Electronics GDR and Pets at Home 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.