Correlation Between Leader Electronics and Strong H

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

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

Diversification Opportunities for Leader Electronics and Strong H

-0.81

Correlation Coefficient

Leader Electronics  Strong H

Pay attention - limited upside

The 3 months correlation between Leader and Strong is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Strong H Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strong H Machinery 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 Strong H. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strong H Machinery has no effect on the direction of Leader Electronics i.e., Leader Electronics and Strong H go up and down completely randomly.

Pair Corralation between Leader Electronics and Strong H

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Strong H. In addition to that, Leader Electronics is 1.84 times more volatile than Strong H Machinery. It trades about -0.1 of its total potential returns per unit of risk. Strong H Machinery is currently generating about 0.1 per unit of volatility. If you would invest  3,365  in Strong H Machinery on October 6, 2024 and sell it today you would earn a total of  195.00  from holding Strong H Machinery or generate 5.79% return on investment over 90 days.

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

Leader Electronics  vs.  Strong H Machinery

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 weak 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.

Strong H Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strong H Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Strong H may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Leader Electronics and Strong H

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

The idea behind Leader Electronics and Strong H Machinery 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.