Correlation Between Lealea Enterprise and Leader Electronics

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

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

Diversification Opportunities for Lealea Enterprise and Leader Electronics

0.69

Correlation Coefficient

Lealea Enterprise  Leader Electronics

Poor diversification

The 3 months correlation between Lealea and Leader is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lealea Enterprise Co and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Lealea Enterprise 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 Lealea Enterprise Co are associated (or correlated) with Leader Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Electronics has no effect on the direction of Lealea Enterprise i.e., Lealea Enterprise and Leader Electronics go up and down completely randomly.

Pair Corralation between Lealea Enterprise and Leader Electronics

Assuming the 90 days trading horizon Lealea Enterprise Co is expected to generate 0.57 times more return on investment than Leader Electronics. However, Lealea Enterprise Co is 1.75 times less risky than Leader Electronics. It trades about -0.16 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.18 per unit of risk. If you would invest  893.00  in Lealea Enterprise Co on December 28, 2024 and sell it today you would lose (69.00) from holding Lealea Enterprise Co or give up 7.73% of portfolio value over 90 days.

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

Lealea Enterprise Co  vs.  Leader Electronics

Lealea Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lealea Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Leader Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leader Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lealea Enterprise and Leader Electronics

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

The idea behind Lealea Enterprise Co and Leader Electronics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.