Correlation Between Trk Corp and Ledtech Electronics

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

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

Diversification Opportunities for Trk Corp and Ledtech Electronics

-0.56

Correlation Coefficient

Trk Corp  Ledtech Electronics

Excellent diversification

The 3 months correlation between Trk and Ledtech is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Trk Corp and Ledtech Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ledtech Electronics Corp and Trk Corp 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 Trk Corp are associated (or correlated) with Ledtech Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ledtech Electronics Corp has no effect on the direction of Trk Corp i.e., Trk Corp and Ledtech Electronics go up and down completely randomly.

Pair Corralation between Trk Corp and Ledtech Electronics

Assuming the 90 days trading horizon Trk Corp is expected to generate 1.02 times more return on investment than Ledtech Electronics. However, Trk Corp is 1.02 times more volatile than Ledtech Electronics Corp. It trades about 0.09 of its potential returns per unit of risk. Ledtech Electronics Corp is currently generating about -0.17 per unit of risk. If you would invest  1,940  in Trk Corp on October 9, 2024 and sell it today you would earn a total of  140.00  from holding Trk Corp or generate 7.22% return on investment over 90 days.

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

Trk Corp  vs.  Ledtech Electronics Corp

Trk Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trk Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Trk Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Ledtech Electronics Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ledtech Electronics Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Ledtech Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Trk Corp and Ledtech Electronics

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

The idea behind Trk Corp and Ledtech Electronics Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.