Correlation Between ASRock and Leadtek Research

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

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

Diversification Opportunities for ASRock and Leadtek Research

0.57

Correlation Coefficient

ASRock  Leadtek Research

Very weak diversification

The 3 months correlation between ASRock and Leadtek is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ASRock Inc and Leadtek Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leadtek Research and ASRock 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 ASRock Inc are associated (or correlated) with Leadtek Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leadtek Research has no effect on the direction of ASRock i.e., ASRock and Leadtek Research go up and down completely randomly.

Pair Corralation between ASRock and Leadtek Research

Assuming the 90 days trading horizon ASRock is expected to generate 1.53 times less return on investment than Leadtek Research. But when comparing it to its historical volatility, ASRock Inc is 1.15 times less risky than Leadtek Research. It trades about 0.05 of its potential returns per unit of risk. Leadtek Research is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,920  in Leadtek Research on December 2, 2024 and sell it today you would earn a total of  750.00  from holding Leadtek Research or generate 10.84% return on investment over 90 days.

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

ASRock Inc  vs.  Leadtek Research

ASRock Inc

Risk-Adjusted Performance

Insignificant

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

Leadtek Research

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leadtek Research are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Leadtek Research showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASRock and Leadtek Research

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

The idea behind ASRock Inc and Leadtek Research 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.