Correlation Between Leader Electronics and Thunder Tiger

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

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

Diversification Opportunities for Leader Electronics and Thunder Tiger

-0.34

Correlation Coefficient

Leader Electronics  Thunder Tiger

Very good diversification

The 3 months correlation between Leader and Thunder is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Leader Electronics and Thunder Tiger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Tiger Corp 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 Thunder Tiger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Tiger Corp has no effect on the direction of Leader Electronics i.e., Leader Electronics and Thunder Tiger go up and down completely randomly.

Pair Corralation between Leader Electronics and Thunder Tiger

Assuming the 90 days trading horizon Leader Electronics is expected to generate 1.0 times less return on investment than Thunder Tiger. But when comparing it to its historical volatility, Leader Electronics is 1.08 times less risky than Thunder Tiger. It trades about 0.05 of its potential returns per unit of risk. Thunder Tiger Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,280  in Thunder Tiger Corp on October 9, 2024 and sell it today you would earn a total of  2,320  from holding Thunder Tiger Corp or generate 54.21% return on investment over 90 days.

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

Leader Electronics  vs.  Thunder Tiger Corp

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.

Thunder Tiger Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thunder Tiger Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Thunder Tiger may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Leader Electronics and Thunder Tiger

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

The idea behind Leader Electronics and Thunder Tiger Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..