Correlation Between Leader Electronics and De Licacy

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

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

Diversification Opportunities for Leader Electronics and De Licacy

-0.26

Correlation Coefficient

Leader Electronics  De Licacy

Very good diversification

The 3 months correlation between Leader and 1464 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and De Licacy Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Licacy Industrial 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 De Licacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Licacy Industrial has no effect on the direction of Leader Electronics i.e., Leader Electronics and De Licacy go up and down completely randomly.

Pair Corralation between Leader Electronics and De Licacy

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the De Licacy. In addition to that, Leader Electronics is 1.07 times more volatile than De Licacy Industrial. It trades about -0.04 of its total potential returns per unit of risk. De Licacy Industrial is currently generating about 0.08 per unit of volatility. If you would invest  1,670  in De Licacy Industrial on December 21, 2024 and sell it today you would earn a total of  125.00  from holding De Licacy Industrial or generate 7.49% return on investment over 90 days.

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

Leader Electronics  vs.  De Licacy Industrial

Leader Electronics

Risk-Adjusted Performance

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 fairly stable basic indicators, Leader Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

De Licacy Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Leader Electronics and De Licacy

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

The idea behind Leader Electronics and De Licacy Industrial 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.