Correlation Between WIN Semiconductors and Leader Electronics

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

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

Diversification Opportunities for WIN Semiconductors and Leader Electronics

0.76

Correlation Coefficient

WIN Semiconductors  Leader Electronics

Poor diversification

The 3 months correlation between WIN and Leader is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding WIN Semiconductors and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and WIN Semiconductors 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 WIN Semiconductors are associated (or correlated) with Leader Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Electronics has no effect on the direction of WIN Semiconductors i.e., WIN Semiconductors and Leader Electronics go up and down completely randomly.

Pair Corralation between WIN Semiconductors and Leader Electronics

Assuming the 90 days trading horizon WIN Semiconductors is expected to generate 1.65 times more return on investment than Leader Electronics. However, WIN Semiconductors is 1.65 times more volatile than Leader Electronics. It trades about 0.02 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.01 per unit of risk. If you would invest  11,000  in WIN Semiconductors on December 2, 2024 and sell it today you would earn a total of  100.00  from holding WIN Semiconductors or generate 0.91% return on investment over 90 days.

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

WIN Semiconductors  vs.  Leader Electronics

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.

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WIN Semiconductors and Leader Electronics

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

The idea behind WIN Semiconductors and Leader Electronics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.