Correlation Between Leader Electronics and Edom Technology

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

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

Diversification Opportunities for Leader Electronics and Edom Technology

0.75

Correlation Coefficient

Leader Electronics  Edom Technology

Poor diversification

The 3 months correlation between Leader and Edom is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Edom Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edom Technology 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 Edom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edom Technology has no effect on the direction of Leader Electronics i.e., Leader Electronics and Edom Technology go up and down completely randomly.

Pair Corralation between Leader Electronics and Edom Technology

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Edom Technology. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 1.09 times less risky than Edom Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Edom Technology Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,590  in Edom Technology Co on September 12, 2024 and sell it today you would earn a total of  460.00  from holding Edom Technology Co or generate 17.76% 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.  Edom Technology 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 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.

Edom Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edom Technology Co 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.

Pair Trading with Leader Electronics and Edom Technology

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

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