Correlation Between Leader Electronics and Nien Hsing

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

By analyzing existing cross correlation between Leader Electronics and Nien Hsing Textile, you can compare the effects of market volatilities on Leader Electronics and Nien Hsing 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 Nien Hsing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Nien Hsing.

Diversification Opportunities for Leader Electronics and Nien Hsing

-0.58

Correlation Coefficient

Leader Electronics  Nien Hsing

Excellent diversification

The 3 months correlation between Leader and Nien is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Nien Hsing Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nien Hsing Textile 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 Nien Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nien Hsing Textile has no effect on the direction of Leader Electronics i.e., Leader Electronics and Nien Hsing go up and down completely randomly.

Pair Corralation between Leader Electronics and Nien Hsing

Assuming the 90 days trading horizon Leader Electronics is expected to generate 3.2 times more return on investment than Nien Hsing. However, Leader Electronics is 3.2 times more volatile than Nien Hsing Textile. It trades about 0.04 of its potential returns per unit of risk. Nien Hsing Textile is currently generating about -0.01 per unit of risk. If you would invest  994.00  in Leader Electronics on September 20, 2024 and sell it today you would earn a total of  531.00  from holding Leader Electronics or generate 53.42% 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.  Nien Hsing Textile

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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Nien Hsing Textile

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Leader Electronics and Nien Hsing

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

The idea behind Leader Electronics and Nien Hsing Textile 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.