Correlation Between Leaders Technology and Company K

Can any of the company-specific risk be diversified away by investing in both Leaders Technology and Company K 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 Company K 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 Company K Partners, you can compare the effects of market volatilities on Leaders Technology and Company K 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 Company K. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leaders Technology and Company K.

Diversification Opportunities for Leaders Technology and Company K

0.53

Correlation Coefficient

Leaders Technology  Company K

Very weak diversification

The 3 months correlation between Leaders and Company is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Leaders Technology Investment and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners 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 Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of Leaders Technology i.e., Leaders Technology and Company K go up and down completely randomly.

Pair Corralation between Leaders Technology and Company K

Assuming the 90 days trading horizon Leaders Technology Investment is expected to under-perform the Company K. In addition to that, Leaders Technology is 1.56 times more volatile than Company K Partners. It trades about -0.04 of its total potential returns per unit of risk. Company K Partners is currently generating about -0.02 per unit of volatility. If you would invest  594,000  in Company K Partners on October 4, 2024 and sell it today you would lose (109,000) from holding Company K Partners or give up 18.35% of portfolio value over 90 days.

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

Leaders Technology Investment  vs.  Company K Partners

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.

Company K Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Company K Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Company K 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 Company K

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

The idea behind Leaders Technology Investment and Company K Partners 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.