Correlation Between ALi Corp and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both ALi Corp 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 ALi Corp and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALi Corp and Leader Electronics, you can compare the effects of market volatilities on ALi Corp 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 ALi Corp with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALi Corp and Leader Electronics.
Diversification Opportunities for ALi Corp and Leader Electronics
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ALi and Leader is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding ALi Corp and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and ALi Corp 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 ALi Corp 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 ALi Corp i.e., ALi Corp and Leader Electronics go up and down completely randomly.
Pair Corralation between ALi Corp and Leader Electronics
Assuming the 90 days trading horizon ALi Corp is expected to generate 2.71 times more return on investment than Leader Electronics. However, ALi Corp is 2.71 times more volatile than Leader Electronics. It trades about 0.07 of its potential returns per unit of risk. Leader Electronics is currently generating about -0.17 per unit of risk. If you would invest 3,000 in ALi Corp on September 12, 2024 and sell it today you would earn a total of 145.00 from holding ALi Corp or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALi Corp vs. Leader Electronics
Performance |
| Timeline |
| ALi Corp |
| Leader Electronics |
ALi Corp and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALi Corp and Leader Electronics
The main advantage of trading using opposite ALi Corp and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALi Corp 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.| ALi Corp vs. Sunplus Technology Co | ALi Corp vs. Silicon Integrated Systems | ALi Corp vs. Zinwell | ALi Corp vs. Altek 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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