Correlation Between Leading Edge and White Pearl

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

By analyzing existing cross correlation between Leading Edge Materials and White Pearl Technology, you can compare the effects of market volatilities on Leading Edge and White Pearl 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 Leading Edge with a short position of White Pearl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and White Pearl.

Diversification Opportunities for Leading Edge and White Pearl

-0.28

Correlation Coefficient

Leading Edge  White Pearl

Very good diversification

The 3 months correlation between Leading and White is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and White Pearl Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Pearl Technology and Leading Edge 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 Leading Edge Materials are associated (or correlated) with White Pearl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Pearl Technology has no effect on the direction of Leading Edge i.e., Leading Edge and White Pearl go up and down completely randomly.

Pair Corralation between Leading Edge and White Pearl

Assuming the 90 days trading horizon Leading Edge Materials is expected to generate 1.95 times more return on investment than White Pearl. However, Leading Edge is 1.95 times more volatile than White Pearl Technology. It trades about 0.27 of its potential returns per unit of risk. White Pearl Technology is currently generating about 0.1 per unit of risk. If you would invest  72.00  in Leading Edge Materials on December 24, 2024 and sell it today you would earn a total of  143.00  from holding Leading Edge Materials or generate 198.61% return on investment over 90 days.

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

Leading Edge Materials  vs.  White Pearl Technology

Leading Edge Materials

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leading Edge Materials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leading Edge unveiled solid returns over the last few months and may actually be approaching a breakup point.

White Pearl Technology

Risk-Adjusted Performance

Modest

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

Pair Trading with Leading Edge and White Pearl

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

The idea behind Leading Edge Materials and White Pearl Technology 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..