Correlation Between Leader Electronics and WIN Semiconductors

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

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

Diversification Opportunities for Leader Electronics and WIN Semiconductors

0.26

Correlation Coefficient

Leader Electronics  WIN Semiconductors

Modest diversification

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

Pair Corralation between Leader Electronics and WIN Semiconductors

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the WIN Semiconductors. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 1.81 times less risky than WIN Semiconductors. The stock trades about -0.21 of its potential returns per unit of risk. The WIN Semiconductors is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  11,400  in WIN Semiconductors on December 29, 2024 and sell it today you would lose (700.00) from holding WIN Semiconductors or give up 6.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Leader Electronics  vs.  WIN Semiconductors

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

WIN Semiconductors

Risk-Adjusted Performance

Very Weak

Over the last 90 days WIN Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WIN Semiconductors 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 WIN Semiconductors

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

The idea behind Leader Electronics and WIN Semiconductors 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.