Correlation Between Compal Broadband and Xin Chio

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

Diversification Opportunities for Compal Broadband and Xin Chio

-0.71

Correlation Coefficient

Compal Broadband  Xin Chio

Pay attention - limited upside

The 3 months correlation between Compal and Xin is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Compal Broadband Networks and Xin Chio Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xin Chio Global 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 Xin Chio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xin Chio Global has no effect on the direction of Compal Broadband i.e., Compal Broadband and Xin Chio go up and down completely randomly.

Pair Corralation between Compal Broadband and Xin Chio

Assuming the 90 days trading horizon Compal Broadband Networks is expected to under-perform the Xin Chio. But the stock apears to be less risky and, when comparing its historical volatility, Compal Broadband Networks is 1.1 times less risky than Xin Chio. The stock trades about -0.35 of its potential returns per unit of risk. The Xin Chio Global is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,125  in Xin Chio Global on February 5, 2024 and sell it today you would lose (85.00) from holding Xin Chio Global or give up 2.72% of portfolio value over 90 days.

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

Compal Broadband Networks  vs.  Xin Chio Global

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Xin Chio Global

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xin Chio Global are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Xin Chio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compal Broadband and Xin Chio

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

The idea behind Compal Broadband Networks and Xin Chio Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.