Correlation Between Compal Broadband and Elite Material

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

Diversification Opportunities for Compal Broadband and Elite Material

0.18

Correlation Coefficient

Compal Broadband  Elite Material

Average diversification

The 3 months correlation between Compal and Elite is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Elite Material Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Material 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 Elite Material. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Material has no effect on the direction of Compal Broadband i.e., Compal Broadband and Elite Material go up and down completely randomly.

Pair Corralation between Compal Broadband and Elite Material

Assuming the 90 days trading horizon Compal Broadband is expected to generate 12.79 times less return on investment than Elite Material. In addition to that, Compal Broadband is 1.22 times more volatile than Elite Material Co. It trades about 0.01 of its total potential returns per unit of risk. Elite Material Co is currently generating about 0.16 per unit of volatility. If you would invest  47,200  in Elite Material Co on September 15, 2024 and sell it today you would earn a total of  12,700  from holding Elite Material Co or generate 26.91% return on investment over 90 days.

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

Compal Broadband Networks  vs.  Elite Material Co

Compal Broadband Networks

Risk-Adjusted Performance

0 of 100

Very Weak

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

Elite Material

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Material Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Elite Material showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compal Broadband and Elite Material

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

The idea behind Compal Broadband Networks and Elite Material 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.