Correlation Between Hilton Food and Compal Electronics

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

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

Diversification Opportunities for Hilton Food and Compal Electronics

-0.27

Correlation Coefficient

Hilton Food  Compal Electronics

Very good diversification

The 3 months correlation between Hilton and Compal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Food Group and Compal Electronics GDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics GDR and Hilton Food 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 Hilton Food Group are associated (or correlated) with Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics GDR has no effect on the direction of Hilton Food i.e., Hilton Food and Compal Electronics go up and down completely randomly.

Pair Corralation between Hilton Food and Compal Electronics

Assuming the 90 days trading horizon Hilton Food Group is expected to under-perform the Compal Electronics. In addition to that, Hilton Food is 1.74 times more volatile than Compal Electronics GDR. It trades about -0.11 of its total potential returns per unit of risk. Compal Electronics GDR is currently generating about 0.12 per unit of volatility. If you would invest  295.00  in Compal Electronics GDR on December 31, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hilton Food Group  vs.  Compal Electronics GDR

Hilton Food Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hilton Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hilton Food and Compal Electronics

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

The idea behind Hilton Food Group and Compal Electronics GDR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.