Correlation Between Edom Technology and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both Edom Technology 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 Edom Technology and Leader Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edom Technology Co and Leader Electronics, you can compare the effects of market volatilities on Edom Technology 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 Edom Technology with a short position of Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edom Technology and Leader Electronics.
Diversification Opportunities for Edom Technology and Leader Electronics
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edom and Leader is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Edom Technology Co and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics and Edom Technology 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 Edom Technology Co 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 Edom Technology i.e., Edom Technology and Leader Electronics go up and down completely randomly.
Pair Corralation between Edom Technology and Leader Electronics
Assuming the 90 days trading horizon Edom Technology Co is expected to under-perform the Leader Electronics. In addition to that, Edom Technology is 1.69 times more volatile than Leader Electronics. It trades about -0.29 of its total potential returns per unit of risk. Leader Electronics is currently generating about -0.17 per unit of volatility. If you would invest 1,760 in Leader Electronics on September 12, 2024 and sell it today you would lose (110.00) from holding Leader Electronics or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edom Technology Co vs. Leader Electronics
Performance |
| Timeline |
| Edom Technology |
| Leader Electronics |
Edom Technology and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edom Technology and Leader Electronics
The main advantage of trading using opposite Edom Technology and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edom Technology 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.| Edom Technology vs. Altek Corp | Edom Technology vs. ALi Corp | Edom Technology vs. Leader Electronics | Edom Technology vs. Spirox 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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