Correlation Between Leader Electronics and Tigerair Taiwan

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

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

Diversification Opportunities for Leader Electronics and Tigerair Taiwan

-0.5

Correlation Coefficient

Leader Electronics  Tigerair Taiwan

Very good diversification

The 3 months correlation between Leader and Tigerair is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Tigerair Taiwan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigerair Taiwan 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 Tigerair Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigerair Taiwan has no effect on the direction of Leader Electronics i.e., Leader Electronics and Tigerair Taiwan go up and down completely randomly.

Pair Corralation between Leader Electronics and Tigerair Taiwan

Assuming the 90 days trading horizon Leader Electronics is expected to under-perform the Tigerair Taiwan. But the stock apears to be less risky and, when comparing its historical volatility, Leader Electronics is 1.15 times less risky than Tigerair Taiwan. The stock trades about -0.04 of its potential returns per unit of risk. The Tigerair Taiwan Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,500  in Tigerair Taiwan Co on December 4, 2024 and sell it today you would lose (200.00) from holding Tigerair Taiwan Co or give up 2.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Leader Electronics  vs.  Tigerair Taiwan 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.

Tigerair Taiwan

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Leader Electronics and Tigerair Taiwan 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.