Correlation Between LEENO Industrial and InBody CoLtd

Can any of the company-specific risk be diversified away by investing in both LEENO Industrial and InBody CoLtd 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 LEENO Industrial and InBody CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LEENO Industrial and InBody CoLtd, you can compare the effects of market volatilities on LEENO Industrial and InBody CoLtd 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 LEENO Industrial with a short position of InBody CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEENO Industrial and InBody CoLtd.

Diversification Opportunities for LEENO Industrial and InBody CoLtd

0.82

Correlation Coefficient

LEENO Industrial  InBody CoLtd

Very poor diversification

The 3 months correlation between LEENO and InBody is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding LEENO Industrial and InBody CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InBody CoLtd and LEENO Industrial 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 LEENO Industrial are associated (or correlated) with InBody CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InBody CoLtd has no effect on the direction of LEENO Industrial i.e., LEENO Industrial and InBody CoLtd go up and down completely randomly.

Pair Corralation between LEENO Industrial and InBody CoLtd

Assuming the 90 days trading horizon LEENO Industrial is expected to generate 1.35 times more return on investment than InBody CoLtd. However, LEENO Industrial is 1.35 times more volatile than InBody CoLtd. It trades about 0.2 of its potential returns per unit of risk. InBody CoLtd is currently generating about 0.05 per unit of risk. If you would invest  15,487,900  in LEENO Industrial on December 3, 2024 and sell it today you would earn a total of  5,362,100  from holding LEENO Industrial or generate 34.62% return on investment over 90 days.

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

LEENO Industrial  vs.  InBody CoLtd

LEENO Industrial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LEENO Industrial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LEENO Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

InBody CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InBody CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, InBody CoLtd may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with LEENO Industrial and InBody CoLtd

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

The idea behind LEENO Industrial and InBody CoLtd 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.