Correlation Between E Lead and Actron Technology

Can any of the company-specific risk be diversified away by investing in both E Lead and Actron Technology 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 Actron Technology 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 Actron Technology, you can compare the effects of market volatilities on E Lead and Actron Technology 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 Actron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Lead and Actron Technology.

Diversification Opportunities for E Lead and Actron Technology

0.56

Correlation Coefficient

E Lead  Actron Technology

Very weak diversification

The 3 months correlation between 2497 and Actron is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding E Lead Electronic Co and Actron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Actron Technology 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 Actron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Actron Technology has no effect on the direction of E Lead i.e., E Lead and Actron Technology go up and down completely randomly.

Pair Corralation between E Lead and Actron Technology

Assuming the 90 days trading horizon E Lead Electronic Co is expected to under-perform the Actron Technology. But the stock apears to be less risky and, when comparing its historical volatility, E Lead Electronic Co is 1.24 times less risky than Actron Technology. The stock trades about -0.14 of its potential returns per unit of risk. The Actron Technology is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  16,600  in Actron Technology on December 4, 2024 and sell it today you would lose (1,100) from holding Actron Technology or give up 6.63% of portfolio value over 90 days.

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

E Lead Electronic Co  vs.  Actron Technology

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.

Actron Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Actron Technology 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 E Lead and Actron Technology

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

The idea behind E Lead Electronic Co and Actron Technology 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.