Correlation Between Great Wall and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both Great Wall 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 Great Wall and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Leader Electronics, you can compare the effects of market volatilities on Great Wall 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 Great Wall with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Leader Electronics.
Diversification Opportunities for Great Wall and Leader Electronics
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Great and Leader is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Great Wall 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 Great Wall Enterprise 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 Great Wall i.e., Great Wall and Leader Electronics go up and down completely randomly.
Pair Corralation between Great Wall and Leader Electronics
Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 0.39 times more return on investment than Leader Electronics. However, Great Wall Enterprise is 2.56 times less risky than Leader Electronics. It trades about 0.29 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.14 per unit of risk. If you would invest 5,100 in Great Wall Enterprise on September 13, 2024 and sell it today you would earn a total of 210.00 from holding Great Wall Enterprise or generate 4.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Leader Electronics
Performance |
| Timeline |
| Great Wall Enterprise |
| Leader Electronics |
Great Wall and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Leader Electronics
The main advantage of trading using opposite Great Wall and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall 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.| Great Wall vs. Charoen Pokphand Enterprise | Great Wall vs. Uni President Enterprises Corp | Great Wall vs. Lien Hwa Industrial | Great Wall vs. Standard Foods Corp |
| Leader Electronics vs. Yang Ming Marine | Leader Electronics vs. Wan Hai Lines | Leader Electronics vs. U Ming Marine Transport | Leader Electronics vs. Taiwan Navigation Co |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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