Correlation Between Sinphar Pharmaceutical and Leader Electronics

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

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

Diversification Opportunities for Sinphar Pharmaceutical and Leader Electronics

0.14

Correlation Coefficient

Sinphar Pharmaceutical  Leader Electronics

Average diversification

The 3 months correlation between Sinphar and Leader is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sinphar Pharmaceutical Co and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Sinphar Pharmaceutical 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 Sinphar Pharmaceutical 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 Sinphar Pharmaceutical i.e., Sinphar Pharmaceutical and Leader Electronics go up and down completely randomly.

Pair Corralation between Sinphar Pharmaceutical and Leader Electronics

Assuming the 90 days trading horizon Sinphar Pharmaceutical Co is expected to under-perform the Leader Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Sinphar Pharmaceutical Co is 3.47 times less risky than Leader Electronics. The stock trades about -0.13 of its potential returns per unit of risk. The Leader Electronics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,720  in Leader Electronics on September 4, 2024 and sell it today you would lose (75.00) from holding Leader Electronics or give up 4.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Sinphar Pharmaceutical Co  vs.  Leader Electronics

Sinphar Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinphar Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sinphar Pharmaceutical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Leader Electronics

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, Leader 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 Sinphar Pharmaceutical and Leader Electronics

The main advantage of trading using opposite Sinphar Pharmaceutical and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinphar Pharmaceutical 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 Sinphar Pharmaceutical 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.