Correlation Between E Lead and Farglory Land

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

By analyzing existing cross correlation between E Lead Electronic Co and Farglory Land Development, you can compare the effects of market volatilities on E Lead and Farglory Land 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 E Lead with a short position of Farglory Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Lead and Farglory Land.

Diversification Opportunities for E Lead and Farglory Land

0.04

Correlation Coefficient

E Lead  Farglory Land

Significant diversification

The 3 months correlation between 2497 and Farglory is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding E Lead Electronic Co and Farglory Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Land Development and E Lead 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 E Lead Electronic Co are associated (or correlated) with Farglory Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Land Development has no effect on the direction of E Lead i.e., E Lead and Farglory Land go up and down completely randomly.

Pair Corralation between E Lead and Farglory Land

Assuming the 90 days trading horizon E Lead is expected to generate 2.43 times less return on investment than Farglory Land. But when comparing it to its historical volatility, E Lead Electronic Co is 1.31 times less risky than Farglory Land. It trades about 0.07 of its potential returns per unit of risk. Farglory Land Development is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7,690  in Farglory Land Development on December 4, 2024 and sell it today you would earn a total of  410.00  from holding Farglory Land Development or generate 5.33% return on investment over 90 days.

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

E Lead Electronic Co  vs.  Farglory Land Development

E Lead Electronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days E Lead Electronic 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.

Farglory Land Development

Risk-Adjusted Performance

OK

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

Pair Trading with E Lead and Farglory Land

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

The idea behind E Lead Electronic Co and Farglory Land Development 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.