Correlation Between Compal Broadband and Accton Technology

Can any of the company-specific risk be diversified away by investing in both Compal Broadband and Accton Technology 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 Accton Technology 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 Accton Technology Corp, you can compare the effects of market volatilities on Compal Broadband and Accton Technology 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 Accton Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Broadband and Accton Technology.

Diversification Opportunities for Compal Broadband and Accton Technology

0.7

Correlation Coefficient

Compal Broadband  Accton Technology

Poor diversification

The 3 months correlation between Compal and Accton is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Accton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accton Technology Corp 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 Accton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accton Technology Corp has no effect on the direction of Compal Broadband i.e., Compal Broadband and Accton Technology go up and down completely randomly.

Pair Corralation between Compal Broadband and Accton Technology

Assuming the 90 days trading horizon Compal Broadband is expected to generate 1.92 times less return on investment than Accton Technology. In addition to that, Compal Broadband is 1.01 times more volatile than Accton Technology Corp. It trades about 0.11 of its total potential returns per unit of risk. Accton Technology Corp is currently generating about 0.21 per unit of volatility. If you would invest  50,200  in Accton Technology Corp on September 4, 2024 and sell it today you would earn a total of  20,600  from holding Accton Technology Corp or generate 41.04% return on investment over 90 days.

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

Compal Broadband Networks  vs.  Accton Technology Corp

Compal Broadband Networks

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compal Broadband Networks are ranked lower than 8 (%) 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.

Accton Technology Corp

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Accton Technology Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Accton Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compal Broadband and Accton Technology

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

The idea behind Compal Broadband Networks and Accton Technology Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.