Correlation Between Macronix International and Compal Electronics

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

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

Diversification Opportunities for Macronix International and Compal Electronics

-0.82

Correlation Coefficient

Macronix International  Compal Electronics

Pay attention - limited upside

The 3 months correlation between Macronix and Compal is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Macronix International Co and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics and Macronix International 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 Macronix International Co 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 has no effect on the direction of Macronix International i.e., Macronix International and Compal Electronics go up and down completely randomly.

Pair Corralation between Macronix International and Compal Electronics

Assuming the 90 days trading horizon Macronix International Co is expected to under-perform the Compal Electronics. In addition to that, Macronix International is 1.31 times more volatile than Compal Electronics. It trades about -0.21 of its total potential returns per unit of risk. Compal Electronics is currently generating about 0.12 per unit of volatility. If you would invest  3,325  in Compal Electronics on August 31, 2024 and sell it today you would earn a total of  375.00  from holding Compal Electronics or generate 11.28% return on investment over 90 days.

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

Macronix International Co  vs.  Compal Electronics

Macronix International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macronix International Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 December 2024.

Pair Trading with Macronix International and Compal Electronics

The main advantage of trading using opposite Macronix International and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macronix International 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 Macronix International Co and Compal Electronics 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.