Correlation Between Compal Electronics and Herald Investment

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

By analyzing existing cross correlation between Compal Electronics GDR and Herald Investment Trust, you can compare the effects of market volatilities on Compal Electronics and Herald Investment 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 Electronics with a short position of Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compal Electronics and Herald Investment.

Diversification Opportunities for Compal Electronics and Herald Investment

0.0

Correlation Coefficient

Compal Electronics  Herald Investment

Pay attention - limited upside

The 3 months correlation between Compal and Herald is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics GDR and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust and Compal Electronics 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 Electronics GDR are associated (or correlated) with Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of Compal Electronics i.e., Compal Electronics and Herald Investment go up and down completely randomly.

Pair Corralation between Compal Electronics and Herald Investment

If you would invest  186,200  in Herald Investment Trust on April 22, 2025 and sell it today you would earn a total of  50,300  from holding Herald Investment Trust or generate 27.01% return on investment over 90 days.

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

Compal Electronics GDR  vs.  Herald Investment Trust

Compal Electronics GDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Compal Electronics GDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Compal Electronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Herald Investment Trust

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Herald Investment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compal Electronics and Herald Investment

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

The idea behind Compal Electronics GDR and Herald Investment Trust 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.