Correlation Between Lelon Electronics and Ligitek Electronics
Can any of the company-specific risk be diversified away by investing in both Lelon Electronics and Ligitek 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 Lelon Electronics and Ligitek Electronics 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 Ligitek Electronics Co, you can compare the effects of market volatilities on Lelon Electronics and Ligitek 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 Lelon Electronics with a short position of Ligitek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lelon Electronics and Ligitek Electronics.
Diversification Opportunities for Lelon Electronics and Ligitek Electronics
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lelon and Ligitek is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lelon Electronics Corp and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics 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 Ligitek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligitek Electronics has no effect on the direction of Lelon Electronics i.e., Lelon Electronics and Ligitek Electronics go up and down completely randomly.
Pair Corralation between Lelon Electronics and Ligitek Electronics
Assuming the 90 days trading horizon Lelon Electronics Corp is expected to generate 0.77 times more return on investment than Ligitek Electronics. However, Lelon Electronics Corp is 1.3 times less risky than Ligitek Electronics. It trades about 0.28 of its potential returns per unit of risk. Ligitek Electronics Co is currently generating about 0.05 per unit of risk. If you would invest 8,080 in Lelon Electronics Corp on October 23, 2024 and sell it today you would earn a total of 1,490 from holding Lelon Electronics Corp or generate 18.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lelon Electronics Corp vs. Ligitek Electronics Co
Performance |
| Timeline |
| Lelon Electronics Corp |
| Ligitek Electronics |
Lelon Electronics and Ligitek Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lelon Electronics and Ligitek Electronics
The main advantage of trading using opposite Lelon Electronics and Ligitek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lelon Electronics position performs unexpectedly, Ligitek 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 Ligitek Electronics will offset losses from the drop in Ligitek Electronics' long position.| Lelon Electronics vs. Walsin Technology Corp | Lelon Electronics vs. Greatek Electronics | Lelon Electronics vs. Pan Jit International | Lelon Electronics vs. Elan Microelectronics Corp |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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