Correlation Between Lelon Electronics and Excellence Optoelectronic

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

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

Diversification Opportunities for Lelon Electronics and Excellence Optoelectronic

-0.13

Correlation Coefficient

Lelon Electronics  Excellence Optoelectronic

Good diversification

The 3 months correlation between Lelon and Excellence is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lelon Electronics Corp and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic and Lelon Electronics 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 Lelon Electronics Corp are associated (or correlated) with Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Lelon Electronics i.e., Lelon Electronics and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between Lelon Electronics and Excellence Optoelectronic

Assuming the 90 days trading horizon Lelon Electronics Corp is expected to under-perform the Excellence Optoelectronic. In addition to that, Lelon Electronics is 2.07 times more volatile than Excellence Optoelectronic. It trades about -0.06 of its total potential returns per unit of risk. Excellence Optoelectronic is currently generating about 0.14 per unit of volatility. If you would invest  2,515  in Excellence Optoelectronic on December 5, 2024 and sell it today you would earn a total of  105.00  from holding Excellence Optoelectronic or generate 4.17% return on investment over 90 days.

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

Lelon Electronics Corp  vs.  Excellence Optoelectronic

Lelon Electronics Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lelon Electronics Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lelon Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Excellence Optoelectronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Excellence Optoelectronic 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.

Pair Trading with Lelon Electronics and Excellence Optoelectronic

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

The idea behind Lelon Electronics Corp and Excellence Optoelectronic 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.