Correlation Between Leadtek Research and ASRock

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

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

Diversification Opportunities for Leadtek Research and ASRock

-0.81

Correlation Coefficient

Leadtek Research  ASRock

Pay attention - limited upside

The 3 months correlation between Leadtek and ASRock is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Leadtek Research and ASRock Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASRock Inc and Leadtek Research 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 Leadtek Research are associated (or correlated) with ASRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASRock Inc has no effect on the direction of Leadtek Research i.e., Leadtek Research and ASRock go up and down completely randomly.

Pair Corralation between Leadtek Research and ASRock

Assuming the 90 days trading horizon Leadtek Research is expected to under-perform the ASRock. In addition to that, Leadtek Research is 1.36 times more volatile than ASRock Inc. It trades about -0.01 of its total potential returns per unit of risk. ASRock Inc is currently generating about 0.12 per unit of volatility. If you would invest  19,650  in ASRock Inc on September 5, 2024 and sell it today you would earn a total of  3,750  from holding ASRock Inc or generate 19.08% return on investment over 90 days.

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

Leadtek Research  vs.  ASRock Inc

Leadtek Research

Risk-Adjusted Performance

0 of 100

Very Weak

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

ASRock Inc

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Leadtek Research and ASRock

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

The idea behind Leadtek Research and ASRock Inc 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.