Correlation Between Compal Broadband and Hu Lane

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

Diversification Opportunities for Compal Broadband and Hu Lane

-0.4

Correlation Coefficient

Compal Broadband  Hu Lane

Very good diversification

The 3 months correlation between Compal and 6279 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Hu Lane Associate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hu Lane Associate 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 Hu Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hu Lane Associate has no effect on the direction of Compal Broadband i.e., Compal Broadband and Hu Lane go up and down completely randomly.

Pair Corralation between Compal Broadband and Hu Lane

Assuming the 90 days trading horizon Compal Broadband Networks is expected to generate 1.7 times more return on investment than Hu Lane. However, Compal Broadband is 1.7 times more volatile than Hu Lane Associate. It trades about -0.01 of its potential returns per unit of risk. Hu Lane Associate is currently generating about -0.03 per unit of risk. If you would invest  2,500  in Compal Broadband Networks on September 23, 2024 and sell it today you would lose (100.00) from holding Compal Broadband Networks or give up 4.0% of portfolio value over 90 days.

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

Compal Broadband Networks  vs.  Hu Lane Associate

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.

Hu Lane Associate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Compal Broadband and Hu Lane

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

The idea behind Compal Broadband Networks and Hu Lane Associate 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.