Correlation Between Lealea Enterprise and Eternal Materials
Can any of the company-specific risk be diversified away by investing in both Lealea Enterprise and Eternal Materials 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 Lealea Enterprise and Eternal Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lealea Enterprise Co and Eternal Materials Co, you can compare the effects of market volatilities on Lealea Enterprise and Eternal Materials 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 Lealea Enterprise with a short position of Eternal Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lealea Enterprise and Eternal Materials.
Diversification Opportunities for Lealea Enterprise and Eternal Materials
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lealea and Eternal is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lealea Enterprise Co and Eternal Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Materials and Lealea Enterprise 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 Lealea Enterprise Co are associated (or correlated) with Eternal Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Materials has no effect on the direction of Lealea Enterprise i.e., Lealea Enterprise and Eternal Materials go up and down completely randomly.
Pair Corralation between Lealea Enterprise and Eternal Materials
Assuming the 90 days trading horizon Lealea Enterprise Co is expected to generate 0.95 times more return on investment than Eternal Materials. However, Lealea Enterprise Co is 1.05 times less risky than Eternal Materials. It trades about 0.03 of its potential returns per unit of risk. Eternal Materials Co is currently generating about -0.3 per unit of risk. If you would invest 917.00 in Lealea Enterprise Co on September 13, 2024 and sell it today you would earn a total of 8.00 from holding Lealea Enterprise Co or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lealea Enterprise Co vs. Eternal Materials Co
Performance |
| Timeline |
| Lealea Enterprise |
| Eternal Materials |
Lealea Enterprise and Eternal Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lealea Enterprise and Eternal Materials
The main advantage of trading using opposite Lealea Enterprise and Eternal Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lealea Enterprise position performs unexpectedly, Eternal Materials 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 Eternal Materials will offset losses from the drop in Eternal Materials' long position.| Lealea Enterprise vs. Li Peng Enterprise | Lealea Enterprise vs. Tainan Spinning Co | Lealea Enterprise vs. USI Corp | Lealea Enterprise vs. UPC Technology Corp |
| Eternal Materials vs. Tainan Spinning Co | Eternal Materials vs. Lealea Enterprise Co | Eternal Materials vs. China Petrochemical Development | Eternal Materials vs. Ruentex Development 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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