Correlation Between Leader Electronics and Tainan Enterprises
Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Tainan Enterprises 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 Tainan Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and Tainan Enterprises Co, you can compare the effects of market volatilities on Leader Electronics and Tainan Enterprises 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 Tainan Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Tainan Enterprises.
Diversification Opportunities for Leader Electronics and Tainan Enterprises
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leader and Tainan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Tainan Enterprises Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tainan Enterprises 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 Tainan Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tainan Enterprises has no effect on the direction of Leader Electronics i.e., Leader Electronics and Tainan Enterprises go up and down completely randomly.
Pair Corralation between Leader Electronics and Tainan Enterprises
Assuming the 90 days trading horizon Leader Electronics is expected to generate 1.39 times more return on investment than Tainan Enterprises. However, Leader Electronics is 1.39 times more volatile than Tainan Enterprises Co. It trades about 0.04 of its potential returns per unit of risk. Tainan Enterprises Co is currently generating about 0.06 per unit of risk. If you would invest 980.00 in Leader Electronics on September 25, 2024 and sell it today you would earn a total of 540.00 from holding Leader Electronics or generate 55.1% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Leader Electronics vs. Tainan Enterprises Co
Performance |
Timeline |
Leader Electronics |
Tainan Enterprises |
Leader Electronics and Tainan Enterprises Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Leader Electronics and Tainan Enterprises
The main advantage of trading using opposite Leader Electronics and Tainan Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, Tainan Enterprises 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 Tainan Enterprises will offset losses from the drop in Tainan Enterprises' long position.Leader Electronics vs. Altek Corp | Leader Electronics vs. Promise Technology | Leader Electronics vs. Edom Technology Co | Leader Electronics vs. Spirox Corp |
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Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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