Correlation Between Compal Electronics and Ablerex Electronics

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

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

Diversification Opportunities for Compal Electronics and Ablerex Electronics

0.36

Correlation Coefficient

Compal Electronics  Ablerex Electronics

Weak diversification

The 3 months correlation between Compal and Ablerex is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics and Ablerex Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ablerex Electronics 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 are associated (or correlated) with Ablerex Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ablerex Electronics has no effect on the direction of Compal Electronics i.e., Compal Electronics and Ablerex Electronics go up and down completely randomly.

Pair Corralation between Compal Electronics and Ablerex Electronics

Assuming the 90 days trading horizon Compal Electronics is expected to generate 7.19 times less return on investment than Ablerex Electronics. But when comparing it to its historical volatility, Compal Electronics is 2.21 times less risky than Ablerex Electronics. It trades about 0.06 of its potential returns per unit of risk. Ablerex Electronics Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,090  in Ablerex Electronics Co on September 2, 2024 and sell it today you would earn a total of  685.00  from holding Ablerex Electronics Co or generate 16.75% 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  vs.  Ablerex Electronics Co

Compal Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Compal Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ablerex Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ablerex Electronics Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ablerex Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Compal Electronics and Ablerex Electronics

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

The idea behind Compal Electronics and Ablerex Electronics Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.