Correlation Between EnTie Commercial and Compal Broadband

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

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

Diversification Opportunities for EnTie Commercial and Compal Broadband

0.09

Correlation Coefficient

EnTie Commercial  Compal Broadband

Significant diversification

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

Pair Corralation between EnTie Commercial and Compal Broadband

Assuming the 90 days trading horizon EnTie Commercial Bank is expected to under-perform the Compal Broadband. But the stock apears to be less risky and, when comparing its historical volatility, EnTie Commercial Bank is 1.84 times less risky than Compal Broadband. The stock trades about 0.0 of its potential returns per unit of risk. The Compal Broadband Networks is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,410  in Compal Broadband Networks on September 3, 2024 and sell it today you would earn a total of  360.00  from holding Compal Broadband Networks or generate 14.94% return on investment over 90 days.

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

EnTie Commercial Bank  vs.  Compal Broadband Networks

EnTie Commercial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnTie Commercial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, EnTie Commercial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Compal Broadband Networks

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Broadband Networks are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Compal Broadband showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EnTie Commercial and Compal Broadband

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

The idea behind EnTie Commercial Bank and Compal Broadband Networks 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.