Correlation Between Compal Electronics and Quilter PLC

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

Diversification Opportunities for Compal Electronics and Quilter PLC

0.09

Correlation Coefficient

Compal Electronics  Quilter PLC

Significant diversification

The 3 months correlation between Compal and Quilter is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics GDR and Quilter PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quilter PLC 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 Quilter PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quilter PLC has no effect on the direction of Compal Electronics i.e., Compal Electronics and Quilter PLC go up and down completely randomly.

Pair Corralation between Compal Electronics and Quilter PLC

Assuming the 90 days trading horizon Compal Electronics GDR is expected to generate 0.3 times more return on investment than Quilter PLC. However, Compal Electronics GDR is 3.32 times less risky than Quilter PLC. It trades about 0.12 of its potential returns per unit of risk. Quilter PLC is currently generating about 0.03 per unit of risk. If you would invest  295.00  in Compal Electronics GDR on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Compal Electronics GDR or generate 5.08% return on investment over 90 days.

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

Compal Electronics GDR  vs.  Quilter PLC

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.

Quilter PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quilter PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Quilter PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Compal Electronics and Quilter PLC

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

The idea behind Compal Electronics GDR and Quilter PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.