Correlation Between Leaders Technology and Daewoo Electronic

Can any of the company-specific risk be diversified away by investing in both Leaders Technology and Daewoo Electronic 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 Leaders Technology and Daewoo Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leaders Technology Investment and Daewoo Electronic Components, you can compare the effects of market volatilities on Leaders Technology and Daewoo Electronic 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 Leaders Technology with a short position of Daewoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leaders Technology and Daewoo Electronic.

Diversification Opportunities for Leaders Technology and Daewoo Electronic

0.75

Correlation Coefficient

Leaders Technology  Daewoo Electronic

Poor diversification

The 3 months correlation between Leaders and Daewoo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Leaders Technology Investment and Daewoo Electronic Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Electronic and Leaders Technology 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 Leaders Technology Investment are associated (or correlated) with Daewoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Electronic has no effect on the direction of Leaders Technology i.e., Leaders Technology and Daewoo Electronic go up and down completely randomly.

Pair Corralation between Leaders Technology and Daewoo Electronic

Assuming the 90 days trading horizon Leaders Technology Investment is expected to generate 1.87 times more return on investment than Daewoo Electronic. However, Leaders Technology is 1.87 times more volatile than Daewoo Electronic Components. It trades about 0.19 of its potential returns per unit of risk. Daewoo Electronic Components is currently generating about 0.27 per unit of risk. If you would invest  25,400  in Leaders Technology Investment on October 10, 2024 and sell it today you would earn a total of  3,800  from holding Leaders Technology Investment or generate 14.96% return on investment over 90 days.

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

Leaders Technology Investment  vs.  Daewoo Electronic Components

Leaders Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leaders Technology Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daewoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daewoo Electronic Components has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daewoo Electronic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leaders Technology and Daewoo Electronic

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

The idea behind Leaders Technology Investment and Daewoo Electronic Components 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.