Correlation Between Te Chang and Leader Electronics

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Can any of the company-specific risk be diversified away by investing in both Te Chang 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 Te Chang and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Te Chang Construction and Leader Electronics, you can compare the effects of market volatilities on Te Chang 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 Te Chang with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Te Chang and Leader Electronics.

Diversification Opportunities for Te Chang and Leader Electronics

5511LeaderDiversified Away5511LeaderDiversified Away100%
-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between 5511 and Leader is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Te Chang Construction and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Te Chang 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 Te Chang Construction 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 Te Chang i.e., Te Chang and Leader Electronics go up and down completely randomly.

Pair Corralation between Te Chang and Leader Electronics

Assuming the 90 days trading horizon Te Chang Construction is expected to generate 0.43 times more return on investment than Leader Electronics. However, Te Chang Construction is 2.32 times less risky than Leader Electronics. It trades about 0.17 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.08 per unit of risk. If you would invest  5,650  in Te Chang Construction on October 1, 2024 and sell it today you would earn a total of  600.00  from holding Te Chang Construction or generate 10.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Te Chang Construction  vs.  Leader Electronics

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -15-10-50510
JavaScript chart by amCharts 3.21.155511 3058
       Timeline  
Te Chang Construction 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15NovDecDec56575859606162636465
Leader Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
JavaScript chart by amCharts 3.21.15NovDecDec1516171819

Te Chang and Leader Electronics Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.97-2.22-1.48-0.730.01240.811.612.423.22 0.10.20.30.4
JavaScript chart by amCharts 3.21.155511 3058
       Returns  

Pair Trading with Te Chang and Leader Electronics

The main advantage of trading using opposite Te Chang and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Te Chang 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 Te Chang Construction 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.
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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