Correlation Between Leader Electronics and Hotel Holiday

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Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Hotel Holiday 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 Hotel Holiday into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leader Electronics and Hotel Holiday Garden, you can compare the effects of market volatilities on Leader Electronics and Hotel Holiday 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 Hotel Holiday. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Hotel Holiday.

Diversification Opportunities for Leader Electronics and Hotel Holiday

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Leader and Hotel is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Hotel Holiday Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Holiday Garden 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 Hotel Holiday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Holiday Garden has no effect on the direction of Leader Electronics i.e., Leader Electronics and Hotel Holiday go up and down completely randomly.

Pair Corralation between Leader Electronics and Hotel Holiday

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Hotel Holiday. In addition to that, Leader Electronics is 1.98 times more volatile than Hotel Holiday Garden. It trades about -0.05 of its total potential returns per unit of risk. Hotel Holiday Garden is currently generating about -0.09 per unit of volatility. If you would invest  1,980  in Hotel Holiday Garden on October 9, 2024 and sell it today you would lose (350.00) from holding Hotel Holiday Garden or give up 17.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Leader Electronics  vs.  Hotel Holiday Garden

 Performance 
       Timeline  
Leader Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Hotel Holiday Garden 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hotel Holiday Garden 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.

Leader Electronics and Hotel Holiday Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Leader Electronics and Hotel Holiday

The main advantage of trading using opposite Leader Electronics and Hotel Holiday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leader Electronics position performs unexpectedly, Hotel Holiday 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 Hotel Holiday will offset losses from the drop in Hotel Holiday's long position.
The idea behind Leader Electronics and Hotel Holiday Garden 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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