Correlation Between Compal Broadband and Champion Building

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

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

Diversification Opportunities for Compal Broadband and Champion Building

-0.39

Correlation Coefficient

Compal Broadband  Champion Building

Very good diversification

The 3 months correlation between Compal and Champion is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Champion Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Building and Compal Broadband 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 Broadband Networks are associated (or correlated) with Champion Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Building has no effect on the direction of Compal Broadband i.e., Compal Broadband and Champion Building go up and down completely randomly.

Pair Corralation between Compal Broadband and Champion Building

Assuming the 90 days trading horizon Compal Broadband Networks is expected to generate 1.15 times more return on investment than Champion Building. However, Compal Broadband is 1.15 times more volatile than Champion Building Materials. It trades about 0.09 of its potential returns per unit of risk. Champion Building Materials is currently generating about -0.06 per unit of risk. If you would invest  2,430  in Compal Broadband Networks on August 31, 2024 and sell it today you would earn a total of  370.00  from holding Compal Broadband Networks or generate 15.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Compal Broadband Networks  vs.  Champion Building Materials

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.

Champion Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champion Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Compal Broadband and Champion Building

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

The idea behind Compal Broadband Networks and Champion Building Materials 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.