Correlation Between TBI Motion and Leader Electronics

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

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

Diversification Opportunities for TBI Motion and Leader Electronics

-0.03

Correlation Coefficient

TBI Motion  Leader Electronics

Good diversification

The 3 months correlation between TBI and Leader is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding TBI Motion Technology and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and TBI Motion 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 TBI Motion Technology 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 TBI Motion i.e., TBI Motion and Leader Electronics go up and down completely randomly.

Pair Corralation between TBI Motion and Leader Electronics

Assuming the 90 days trading horizon TBI Motion Technology is expected to generate 2.11 times more return on investment than Leader Electronics. However, TBI Motion is 2.11 times more volatile than Leader Electronics. It trades about 0.11 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.14 per unit of risk. If you would invest  4,220  in TBI Motion Technology on September 16, 2024 and sell it today you would earn a total of  1,030  from holding TBI Motion Technology or generate 24.41% return on investment over 90 days.

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

TBI Motion Technology  vs.  Leader Electronics

TBI Motion Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TBI Motion Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TBI Motion showed solid returns over the last few months and may actually be approaching a breakup point.

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with TBI Motion and Leader Electronics

The main advantage of trading using opposite TBI Motion and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TBI Motion 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 TBI Motion Technology 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.