Correlation Between Leader Electronics and Advancetek Enterprise

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

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

Diversification Opportunities for Leader Electronics and Advancetek Enterprise

-0.53

Correlation Coefficient

Leader Electronics  Advancetek Enterprise

Excellent diversification

The 3 months correlation between Leader and Advancetek is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Advancetek Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advancetek Enterprise and Leader 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 Leader Electronics are associated (or correlated) with Advancetek Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advancetek Enterprise has no effect on the direction of Leader Electronics i.e., Leader Electronics and Advancetek Enterprise go up and down completely randomly.

Pair Corralation between Leader Electronics and Advancetek Enterprise

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Advancetek Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 1.21 times less risky than Advancetek Enterprise. The stock trades about -0.11 of its potential returns per unit of risk. The Advancetek Enterprise Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,820  in Advancetek Enterprise Co on October 5, 2024 and sell it today you would earn a total of  520.00  from holding Advancetek Enterprise Co or generate 7.62% return on investment over 90 days.

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

Leader Electronics  vs.  Advancetek Enterprise Co

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Advancetek Enterprise

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advancetek Enterprise Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advancetek Enterprise may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Leader Electronics and Advancetek Enterprise

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

The idea behind Leader Electronics and Advancetek Enterprise Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.