Correlation Between Lelon Electronics and ALFORMER Industrial
Can any of the company-specific risk be diversified away by investing in both Lelon Electronics and ALFORMER Industrial 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 Lelon Electronics and ALFORMER Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lelon Electronics Corp and ALFORMER Industrial Co, you can compare the effects of market volatilities on Lelon Electronics and ALFORMER Industrial 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 Lelon Electronics with a short position of ALFORMER Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lelon Electronics and ALFORMER Industrial.
Diversification Opportunities for Lelon Electronics and ALFORMER Industrial
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lelon and ALFORMER is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lelon Electronics Corp and ALFORMER Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALFORMER Industrial and Lelon Electronics 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 Lelon Electronics Corp are associated (or correlated) with ALFORMER Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALFORMER Industrial has no effect on the direction of Lelon Electronics i.e., Lelon Electronics and ALFORMER Industrial go up and down completely randomly.
Pair Corralation between Lelon Electronics and ALFORMER Industrial
Assuming the 90 days trading horizon Lelon Electronics Corp is expected to generate 1.23 times more return on investment than ALFORMER Industrial. However, Lelon Electronics is 1.23 times more volatile than ALFORMER Industrial Co. It trades about 0.48 of its potential returns per unit of risk. ALFORMER Industrial Co is currently generating about -0.17 per unit of risk. If you would invest 8,220 in Lelon Electronics Corp on November 6, 2024 and sell it today you would earn a total of 2,030 from holding Lelon Electronics Corp or generate 24.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lelon Electronics Corp vs. ALFORMER Industrial Co
Performance |
| Timeline |
| Lelon Electronics Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| ALFORMER Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lelon Electronics and ALFORMER Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lelon Electronics and ALFORMER Industrial
The main advantage of trading using opposite Lelon Electronics and ALFORMER Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lelon Electronics position performs unexpectedly, ALFORMER Industrial 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 ALFORMER Industrial will offset losses from the drop in ALFORMER Industrial's long position.The idea behind Lelon Electronics Corp and ALFORMER Industrial Co 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.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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