Correlation Between Escalade Incorporated and Leatt Corp

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

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

Diversification Opportunities for Escalade Incorporated and Leatt Corp

0.19

Correlation Coefficient

Escalade Incorporated  Leatt Corp

Average diversification

The 3 months correlation between Escalade and Leatt is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Leatt Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatt Corp and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Leatt Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatt Corp has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Leatt Corp go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Leatt Corp

Given the investment horizon of 90 days Escalade Incorporated is expected to generate 2.14 times more return on investment than Leatt Corp. However, Escalade Incorporated is 2.14 times more volatile than Leatt Corp. It trades about 0.09 of its potential returns per unit of risk. Leatt Corp is currently generating about -0.03 per unit of risk. If you would invest  1,404  in Escalade Incorporated on December 29, 2024 and sell it today you would earn a total of  173.00  from holding Escalade Incorporated or generate 12.32% return on investment over 90 days.

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

Escalade Incorporated  vs.  Leatt Corp

Escalade Incorporated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Escalade Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Escalade Incorporated sustained solid returns over the last few months and may actually be approaching a breakup point.

Leatt Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leatt Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leatt Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Escalade Incorporated and Leatt Corp

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

The idea behind Escalade Incorporated and Leatt 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.