Correlation Between Microelectronics and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both Microelectronics 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 Microelectronics and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microelectronics Technology and Leader Electronics, you can compare the effects of market volatilities on Microelectronics 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 Microelectronics with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microelectronics and Leader Electronics.
Diversification Opportunities for Microelectronics and Leader Electronics
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microelectronics and Leader is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Microelectronics Technology and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Microelectronics 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 Microelectronics Technology 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 Microelectronics i.e., Microelectronics and Leader Electronics go up and down completely randomly.
Pair Corralation between Microelectronics and Leader Electronics
Assuming the 90 days trading horizon Microelectronics Technology is expected to generate 2.28 times more return on investment than Leader Electronics. However, Microelectronics is 2.28 times more volatile than Leader Electronics. It trades about 0.11 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.15 per unit of risk. If you would invest 2,895 in Microelectronics Technology on August 30, 2024 and sell it today you would earn a total of 250.00 from holding Microelectronics Technology or generate 8.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microelectronics Technology vs. Leader Electronics
Performance |
| Timeline |
| Microelectronics Tec |
| Leader Electronics |
Microelectronics and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microelectronics and Leader Electronics
The main advantage of trading using opposite Microelectronics and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microelectronics 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.| Microelectronics vs. D Link Corp | Microelectronics vs. Accton Technology Corp | Microelectronics vs. Macronix International Co | Microelectronics vs. Ritek Corp |
| Leader Electronics vs. Yulon Motor Co | Leader Electronics vs. Far Eastern Department | Leader Electronics vs. China Steel Corp | Leader Electronics vs. Chang Hwa Commercial |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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