Correlation Between Leatt Corp and JAKKS Pacific

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

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

Diversification Opportunities for Leatt Corp and JAKKS Pacific

0.26

Correlation Coefficient

Leatt Corp  JAKKS Pacific

Modest diversification

The 3 months correlation between Leatt and JAKKS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Leatt Corp and JAKKS Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAKKS Pacific and Leatt Corp 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 Leatt Corp are associated (or correlated) with JAKKS Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAKKS Pacific has no effect on the direction of Leatt Corp i.e., Leatt Corp and JAKKS Pacific go up and down completely randomly.

Pair Corralation between Leatt Corp and JAKKS Pacific

Given the investment horizon of 90 days Leatt Corp is expected to generate 0.38 times more return on investment than JAKKS Pacific. However, Leatt Corp is 2.63 times less risky than JAKKS Pacific. It trades about -0.05 of its potential returns per unit of risk. JAKKS Pacific is currently generating about -0.03 per unit of risk. If you would invest  700.00  in Leatt Corp on December 28, 2024 and sell it today you would lose (26.00) from holding Leatt Corp or give up 3.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Leatt Corp  vs.  JAKKS Pacific

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.

JAKKS Pacific

Risk-Adjusted Performance

Very Weak

Over the last 90 days JAKKS Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Leatt Corp and JAKKS Pacific

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

The idea behind Leatt Corp and JAKKS Pacific 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.