Correlation Between Leader Electronics and Trusval Technology

Can any of the company-specific risk be diversified away by investing in both Leader Electronics and Trusval 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 Trusval 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 Trusval Technology Co, you can compare the effects of market volatilities on Leader Electronics and Trusval 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 Trusval Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Electronics and Trusval Technology.

Diversification Opportunities for Leader Electronics and Trusval Technology

0.67

Correlation Coefficient

Leader Electronics  Trusval Technology

Poor diversification

The 3 months correlation between Leader and Trusval is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Trusval Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trusval 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 Trusval Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trusval Technology has no effect on the direction of Leader Electronics i.e., Leader Electronics and Trusval Technology go up and down completely randomly.

Pair Corralation between Leader Electronics and Trusval Technology

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Trusval Technology. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 1.29 times less risky than Trusval Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Trusval Technology Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19,050  in Trusval Technology Co on December 5, 2024 and sell it today you would earn a total of  1,350  from holding Trusval Technology Co or generate 7.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.21%
Values	Daily Returns

Leader Electronics  vs.  Trusval Technology Co

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 fairly stable basic indicators, Leader Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Trusval Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trusval Technology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Trusval Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Leader Electronics and Trusval Technology

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

The idea behind Leader Electronics and Trusval 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.